Keeping family records in a businesslike manner saves time, trouble, money, and frustration. It assures that papers will be available when needed without the aggravation of trying to find them and also might save the cost and time lost in getting duplicate copies, if in fact duplicates are even available.
Records should serve one of three purposes: (1) provide evidence of some significant event in an individual's or family's life; (2) provide proof of ownership; or (3) provide a record of activities such as those relating to financial matters and personal matters.
Over time, there probably will be a large accumulation of records. Therefore, it is important to know what to keep and how long to keep them. When deciding whether to discard some record, consider the likelihood of that record being needed in the future or, if so, whether it can be obtained from another source quickly, easily, and inexpensively.
Generally, personal and family records are divided in four categories: (1) personal; (2) general ownership and financial; (3) tax; and (4) general purchase.
* Personal records provide documentation of events such as birth, marriage, divorce, death, military service, adoption, naturalization, medical, and insurance policies. These should be kept permanently. Personal statements, such as preferred funeral arrangements, should be dated and a copy provided to a close friend or relative.
* General ownership and financial include housing records such as titles, deeds, records showing original cost or value of the house and property, as well as home improvement costs. These should be retained for at least seven years from the date that ownership ends. Investment records such as stocks, bonds, investment purchases, and investment sales should be kept for six years after the deadline for the year of the sale. Personal financial records, such as trust agreements, wills, retirement plan agreements, and power of attorney documents should be kept for as long as the agreements are in effect.
* Tax records, such as federal and state income tax returns (including canceled checks that serve to substantiate an income tax deduction), gift, and estate tax returns should be kept for at least six years. The Internal Revenue Service has three years from the time of filing to assess additional taxes through audit. The time period can be extended, however, if there is a substantial underreport of income (25 percent or more of your income). Some financial advisors suggest that tax returns should be kept for ten years. Filing a fraudulent return or failing to file a return eliminates any statute of limitations for an audit by the IRS. For tax purposes, papers documenting home purchases and improvements should be kept as long as the property is owned.
* The most difficult decisions about how long to keep records are usually those related to everyday consumer purchase records, such as sales receipts, canceled checks, bank statements, and warranties for major purchases. These should be kept for as long as the item is owned or until the warranty expires, with a minimum of three years.
Although it is important for families to save records and be professional in filing those records, it is equally important to know when to discard records that are no longer of personal value to the family.
In short, the standard rule of thumb that governs when to dispose of records is to keep the records or items until they no longer are useful.
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