What Papers are Important?
Often you hear that you should save those important papers. What are the important papers?
Tax records: These include any forms and statements that show income or verify deductions (W-2s, 1099s, canceled checks, receipts, etc.), as well as copies of your return. The minimum amount of time to keep these records is three years. That’s typically the amount of time the IRS has to audit a return, and sometimes three years of tax records are required for an estate audit.
To be safe, however, experts recommend you keep them for six years, since that’s the time the IRS has to audit a return if you under report your gross income by more than 25 percent.
Bank statements: On the high side, the recommendation for keeping banking records is seven years. At the very least, it’s good to keep a record of canceled checks for several years, since they can provide a useful record of how much you spent on, say, home improvements when you sell a house or to prove you made a payment on something.
Bills: Generally, you needn’t keep them on file for more than a year unless they have tax, legal or other uses. In that case, you might choose to keep them longer.
For example, a utility bill may be needed to prove a home-office deduction. Or, if you have a credit card that provides a warranty for your purchases to protect you against theft or defect, you may wish to keep billing statements until the warranty runs out (typically up to three years). You may need to show the original billing statement showing the purchase of the product in order to get reimbursed.
Homeowner records: The deed and title to your house, your closing and mortgage statements, and any receipts documenting how much you spent on home improvements should be kept indefinitely. These will help you – or your heirs – track the house’s value (and appreciation) when it’s sold.
Investment records: Retirement and brokerage account statements, especially those indicating purchases, distributions and stock splits, should be kept indefinitely, since they create a paper trail of your investments, and they can be used to determine the cost basis when you sell your stocks or funds. They also help your heirs trace the origins of an investment if you bequeath it to them.
Insurance records: You should keep records of your insurance policies (life, health, disability, auto, homeowner, liability, etc.) for at least as long as the policy lasts.
Other relevant documents: Your birth certificate, marriage certificate, divorce decrees, and military records should be kept indefinitely.
Life- and estate-planning documents: You should always make sure you have on file an up-to-date copy of your will, your living will, your health care proxy, and your power of attorney documents.
Without a will your valuables may be turned over to the state. Not having any information about your heirs the state could put the unclaimed cash and treasures into its unclaimed property account. It would then be up to your heirs to search for the unclaimed property.
