Keeping The Best Records

lipWhen I started thinking about this column, I felt a flush of guilt. To the left of my desk is a foot-high pile of stuff awaiting filing. And my cabinet is full of old papers I haven’t thrown away. How could I help others get organized when I’m drowning myself? So I’m fixing things and feeling better–just as you will, as you begin to wring order out of chaos.

Good records simplify your life. And they’re money in the bank for your heirs. Americans lose millions because they never find all the savings accounts, life insurance policies, and investments that careless relatives leave behind.

Here’s a quick guide to what to keep, what to toss, and where to stash it.

In a home safe or bank safe-deposit box, protected from fire and flood:

* Your will, trusts, and cemetery deed.

* A home inventory. Take still or video pictures of everything to help you collect on fire insurance. Include appraisals or sales receipts for valuable items.

* Documents proving marriage, divorce, military service, birth, death, adoption, child custody, citizenship, education, and technical or professional training.

* Life insurance policies. Include notes about coverage that your survivors might not think of, such as small policies granted by a credit union or club, or accident insurance if you charged a travel ticket to a credit card. Keep letters and sales materials from the insurance agent. That way, if you find you were misled, you might get your money back.

* Deeds, titles, and associated records.

* Proof that a debt you owed was paid off (in case, after your death, someone asks your heirs-s to pay again).

* Proof of any money owed to you.

* Stocks, U.S. savings bonds, and other securities.

* Contracts that entitled you to stock options or deterred pay.

* A list of all your assets and liabilities, account numbers, what’s on your computer, and all other personal-finance information.

In a home safe so they’re readily available:

* Your durable power of attorney, so someone can manage your affairs if you’re incapacitated.

* Your health-care directive or living will, so someone can make medical decisions if you can’t.

* A note stating where you keep the bank safe-deposit box key.

In a home file cabinet:

* Tax records if you itemize deductions for example, church and charitable contributions, mortgage interest, real-estate taxes, and unreimbursed medical bills (deductible only if they exceed 7.5 percent of your adjusted gross income: toss at year’s end if they don’t.)

Keep back tax returns for at least three years; that’s when audits normally stop. The IRS can go back six years if you under reported your income by more than 25 percent, and forever if it suspects fraud.

You need to keep older tax returns if they show the capital gain you’re carrying forward on your house, investment losses from previous years, or any contributions made to a nondeductible Individual Retirement Account. If you expect a company pension, save all back tax returns. Companies don’t always maintain accurate records.

* Checking account statements. Keep for three (or six) years for tax purposes. Save canceled checks and receipts that prove tax deductions, the value of household goods (for insurance purposes), or money you spent improving your house. Keep deposit slips until deposits show up on your monthly statement. Toss everything else, including canceled checks.

* Booklets on employee benefits and where to call to get them paid.

* Booklets on health and disability insurance, including information on what’s covered and where to call to get authorization for treatment.

* Homeowner’s and auto insurance policies and tenant agreements. Toss old policies, once the statute of limitations has run out (often two or three years).

* Credit card statements. Check them for accuracy and keep for six months or so, in case a dispute arises over what was actually paid. Then toss, unless you need an inventory of purchases. Always keep the original lending agreement and any notices of changes.

* Other debt statements, including mortgages, car leases and loans, and personal loans.

* Pay stubs. Toss them at year-end, when you get your W-2.

* Retirement plan documents, including all annual statements from your employer Keep current information about investment choices and performance.

* Other investment material. Keep annual statements and prospectuses. If you have a brokerage account, keep the brokerage agreement and confirmations oF trades (so you’ll know the buying price and commission you paid).

Where To Hold Them

Throw out those shoe boxes and overflowing accordion files. Here’s what to substitute:

1. A bank safe-deposit box, for maximum protection. Small boxes, for holding papers and a little jewelry, cost around $10 to $50 a year. Be sure to tell your executor where to find the keys!

2. A fireproof home safe, for hard-to-replace records. The safe should be rated at least Class 350 for fire resistance by the Underwriters Laboratories, Inc. To protect computer disks, get a class 125 safe. Plain metal boxes don’t work: The heat of fire would scorch to ashes any documents inside.

3. A file cabinet, whether steel or cardboard for replaceable records. You can tuck a two-drawer cabinet under a table. Just don’t put it in the attic. Unless your cabinet is handy, your system will fall apart.


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