Houston Estate Planning and Elder Law Attorney Blog
Keeping your financial house in order is not that complicated, according to the national newspaper USA Today in "Drowning in bank statements, etc.? Here's what you can toss." There are three overarching tasks: pay bills on time, file taxes and save more. Getting organized is the best way to start, and what better way to start the New Year than a clean sweep of paperwork?
Most of the documents you receive from banks, credit card companies and utility companies do not need to be kept, unless you anticipate having a problem.
For instance, bank accounts and bill balances can go. There's no real reason to keep those. These update you on balances at a moment in time but don't mean much in the future. Most of these don't need to be kept for more than a year or two, and typically electronic records will work just as well. However, tax-related financial documents are a different story. In the event of an audit, you'll need all the forms from that tax year to prove your return was accurate. The IRS says you should keep all your tax documents for at least three years. This includes your W-2s with your income for the tax year and your Form 1098 mortgage interest statement. If you have a claim for a loss from worthless securities or bad debt deduction, the IRS recommends you keep tax documents for up to seven years. After seven years, the only reason to hang onto tax documents is if you haven't filed a return at all or if you filed a fraudulent return, according to IRS record-keeping guidelines.
If so, you've got bigger issues.
In this instance, the old adage "Better Safe than Sorry" may create more problems than shredding documents. There's the risk of identity theft or fraud if sensitive data falls into the wrong hands. Also, with all that clutter, your important documents may never find the right hands when they're actually needed.
Another category of documents is important and difficult to replace: property deeds, passports, and powers of attorney. They should be kept in a safety deposit box at your bank or in a fire-proof safe. Your estate planning attorney will be able to provide you with guidelines for safekeeping estate-related documents, including those that you may need in the event that you or your spouse passes away.
WHAT TO KEEP: Tax paperwork, estate-planning documents and pension plan documents.
WHAT TO SHRED: These are typically available online. Go ahead and trash bank account statements, credit card bills, quarterly investment statements, and utility, cable, and phone bills.
You may want to let trusted family members know where important documents are and how to access them. Consider this another part of the on-going conversation about your wishes to have with your heirs.
Reference: USA Today (December 21, 2015) "Drowning in bank statements, etc.? Here's what you can toss"