Spring Cleaning

With all of us sheltering in place, we are probably doing some long overdue cleaning and going through things that we have accumulated.  Among the accumulation, we probably have seen financial records we forgot we had.  So, what do you keep?  What do you shred?  (And please, don’t just rip into a couple of pieces and put in your paper recycling.  Don’t take the chance for your information to be stolen.)

TAX RETURNS – It is recommended that you keep these for seven (7) years.  A suggestion is to put the information for a specific year into a large envelope and mark the year on the outside.  This will make it easier to annually discard information more than seven (7) years old and keep your stash to a minimum.  Of course, if you have this information stored electronically, you are one step ahead of this method. 

INFORMATION ON INHERITED ASSETS OR ASSETS RECEIVED AS GIFTS – If these assets have a basis that will be needed in the future should you sell the asset and need to report the sale on your income tax returns, keep the basis information as long as you own the asset.  Then, once you report the sale on your income tax return, put the basis information with your tax information for that year. 

REAL ESTATE INFORMATION – It is recommended that you keep the settlement statement from your original purchase as well as records to substantiate any capital improvements.  This information will be needed at such time as you would sell the property. 

INFORMATION ON SECURITIES – You should keep information regarding the purchase of the securities for basis purposes.  Also, keep pertinent information on stock splits or return of principal.  Dividend information is very important if you have a DRIP – dividend reinvestment plan – as the additional dividends will have various basis amounts. 

MILITARY PAPERS – Discharge papers, benefits, military insurance, etc., should be kept for purposes of Social Security, veteran’s benefits both during life as well as for death benefits.  Military honors can be a part of funeral services, however, it is necessary that the discharge papers be available for presentation. 

RETIREMENT PLANS – If you have made nondeductible contributions to a retirement-type plan, records should be kept for the contributions to support tax liability when funds are withdrawn.

LEGAL JUDGMENT/LOAN SATISFACTIONS – Keep these indefinitely as proof of the payment.  If the document has been filed with the Courts, however, this may not be necessary as the proof of payment is of public record. 

INSURANCE POLICIES – Keep these records as long as the policy is in effect.  If the policy is no longer effective, keep the status report from the insurance company stating the policy has been cancelled.  This is true for all types of insurance.  Remember that life insurance policies may be paid up and while no premiums are being paid, there is a value for the policy. 

Hopefully this will help you reduce the information you are hanging onto.  Remember to SHRED, SHRED, SHRED when discarding sensitive information.  The best rule – if in doubt, keep it.


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About the Author

Kay Sowa is a paralegal in the Trusts and Estates Group at Capehart & Scatchard, P.A. She is an IRS Enrolled Agent, an Accredited Estate Planner®, and a Certified Trust and Fiduciary Advisor. She oversees the trust and estate administration practice for the firm. She is an accomplished author and lecturer who has frequently spoken on behalf of a number of organizations including the National Business Institute and the Institute of Paralegal Education.

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