Document Retention for the Home

We are often asked by people “how long do I have to keep these documents?”  The papers pile up and the space to keep them seems to disappear.  This problem is especially true when people downsize from a house to smaller dwelling or apartment.

What to keep, and for how long

Tax returns – generally the IRS will only ask for up to three years of information if they conduct an audit.  However, if they suspect that was fraud involved, then they can go after six years.  This time period is from the later of when the tax return was due or actually filed.  So if you didn’t file your 2009 tax return until 2011, the time period doesn’t start until the actual filing date.  We recommend that you keep copies of your tax returns for at least seven years before you get rid of them.

Receipts – You don’t need to keep every receipt that you get, but the ones that pertain to deductions claimed on your tax returns, for example, business expenses or charitable donations, should be kept for as long as you keep your tax returns. We recommend that you keep these receipts with the tax return.  This ensures that if you do need to prepare for an audit, everything is where you need it to be.

W-2 forms- the W-2 forms you receive from your employer provide information to compute your taxes.  The information is also used by the Social Security Administration in calculating the amount of Social Security you will be entitled to.  Do not get rid of these forms until you have verified that the Social Security Administration (SSA) has correctly recorded this information (do not assume anything).   The SSA has stopped mailing annual statements, but you can check on line to verify that all earnings have been properly recorded.

Contracts –It’s important to hold onto contracts for at least the time that the contract is in effect.  What does this mean?  If it’s an employment contract, don’t get rid of it before you leave the job, and all of the restrictions included in the agreement for after you leave the  job are complete.  If it’s a contract for repairs being done to your house, hold onto it until your repairs have been completed and the time period for any warranties or guarantees given have expired.  However, it is a good idea to hold onto these contracts for an additional six years after it ends.  If a claim is going to arise after the fact, those six years make up the longest statute of limitations period.  Contracts (and proof of payments) for repairs and improvements to your home (or condominium or co-op), should be kept for as long as you own the dwelling.  They will be needed to compute the final cost basis when you file your tax return for the year of sale. When you sell your home, these documents should then be kept with the tax documents for the year of the sale.

Deeds – It is important that you keep the deed to any property that you buy, for as long as you own the property.  However, if the deed is recorded in the County Clerk’s office, you can request a new copy if it is lost.   You should also keep a copy of any surveys, title insurance, certificates of occupancy that pertain to the property for as long as you own the property.

Last Wills and Testaments, Health Care Proxies, Powers of Attorney, Living Wills, Trusts – These documents should be held onto for as long as they are in effect, and destroyed the minute that you revoke them.  In addition, other people should know how to find these documents in case they are needed.  A document location sheet, listing important documents, and where to find them, along with other important information is a good idea.  Family members and the individuals named in these documents should have copies of this sheet so they know where they can find what they need.

An important note about Powers of Attorney, Health Care Proxies and Living Wills:  a copy is just as valid as an original, so if you have given copies to anyone, be they a doctor, or the person named in the document, you want to ensure that when you create new versions, you get the old ones back.  An attorney can assist you in ensuring that you notify prior holders of the revocation.

As a general rule, consider the “Rule of Seven.”  When in doubt, keep it for seven years and then destroy it.

Where to keep documents

A good file cabinet is enough for most documents.  Tax returns and contracts are safe in a locked cabinet where you can both organize them and secure them.  You can, but it’s not necessary to, purchase a fireproof file cabinet.  Most documents do not need to be kept in a bank safe deposit box.

Estate planning documents, such as your Last Will and Testament, should be kept in a fire-proof lockbox or safe.  If you do purchase a fireproof file cabinet or home safe, they can hold these documents as well.  Often the original Last Will and Testament is kept for safe keeping by the attorney who drafted the document.  Copies of your Will and documents needed upon death, such as cemetery plot location and final instructions, should be kept in a place that is easy to find, and appropriate parties should be aware of their location.

Destroying Documents

Any Estate Planning documents, once revoked, should be destroyed.  Most office supply stores offer shredding services.  It is important to make sure that you are not keeping older documents around because of the potential for confusion.

It’s also important to destroy (shred), instead of just throw away, old tax records, because these documents hold personal identifying information, such as your social security number and birthdate.  Old bills and unwanted credit card invitations should be shredded; as they contain account information that you do not want to make public.  Ensuring that these documents have been destroyed will help keep you safe from identity theft.