Posts Tagged ‘records retention’

Some More Things You Could Throw Away

AUGUST 11, 2014 VOLUME 21 NUMBER 29

Last week we wrote about how you could start reducing some of the paper clutter in your home. This week we continue that conversation, with some additional suggestions about what you can throw away — right now.

We suggested last week that you only really need to keep tax records for seven years. But the reality is that you can probably throw away a lot of what you think of as tax records well before that time. Do you keep copies of paid bills in a file or drawer someplace? You can stop doing that. Unless the paid bills include, say, evidence of a charitable donation, or payment of a medical bill, you probably don’t need to keep them at all, and you certainly don’t need to keep them more than the month it takes to get a new bill showing that you did, in fact, pay last month’s bill.

Maybe you don’t get paper bills at all, or only a few. It’s pretty easy to sign up for online delivery of most of your regular bills, and then you won’t have to think about what paper bills you need to keep.

Bank and brokerage statements? You can probably shred most of them pretty shortly after you receive them, especially if you have online access to them in the event that there is ever any dispute. Note, however, that many banks and brokerage houses only let you search your financial records for a limited time (though the records may be available longer if you pay them to retrieve statements). Also, if you ever change banks you may lose access to the older information. But is that a problem? Usually not — they will probably keep the records available online longer than you will ever need them.

Explanations of Benefits (EOBs)? Look at them and throw them away. They are not bills, and if you do owe anything you will get an actual bill later. Meanwhile, they are just notices that a claim has been made on your insurance (including Medicare). You are looking at them only to make sure that there is no mistake or fraudulent activity on your account. They seem so official — but for a Medicare recipient, a single doctor’s visit can end up generating half a dozen two-page documents that you don’t need to keep.

Receipts? Toss them, unless they are important for a particular reason. Why might they be important? There is the possibility that your purchase might qualify for a medical deduction on your income taxes (but not a very high likelihood). You might need to prove the value of new furniture or jewelry if you make an insurance claim some day. But the receipt for the $18 toilet plunger you just bought? Throw that paper strip away.

Mail solicitations can accumulate relentlessly. Throw them away immediately on receipt unless you are actually going to buy something, or make a donation — don’t hang on to them “just in case.” That’s how you got that giant pile of stuff you never look at on the table by your front door. In fact, start with that pile — throw it all away.

Credit card solicitations? Shred them. They are not likely to be a better deal than the card you’re now holding, and just applying can affect your credit rating. Better to get rid of them as you get them

That raises a related question: which things do you simply toss and which do you shred? Our rule is that if there is identifiable information (address, account number, full name) somewhere on the document, we shred it. That’s an abundance of caution (it’s actually pretty easy to get your name and address from public records), but it’s an easy rule to remember. We don’t usually apply that rule to catalogs, but you could rip the address page off and shred that just to keep a simple, universal rule. You might want to invest in a small home/office shredder and set it up right next to that table by the front door — you know, the one with all the unreviewed mail on it.

Here’s the thing about this effort to reduce the paper clutter in your home: your natural inclination is to keep things that you might regret having discarded some day. We think you should reverse the approach and discard things unless you’re reasonably confident that you’ll need them later. Otherwise you’ll always be awash in paper, and you’ll leave your heirs with the daunting task of wading through piles of twenty-year-old records they just have to shred.

Most of the experts on managing your home paper flow suggest that you make three or four categories of paper: things you can toss immediately, things you can toss as soon as you get the next version (like next month’s bank statement) and things you need to keep long term. And there’s nothing that stops you from scanning that last category into your computer and throwing away most of the original documents.

Maybe a better question would be: what paper is it critical that you keep? We have just these few suggestions:

  • Your tax returns and the supporting documentation (W2s, 1099s, etc) for about seven years
  • Your estate planning documents, and particularly your original will (speaking of which — shred all the older versions you’ve been keeping around. You don’t need them)
  • Annual brokerage and retirement account statements (you don’t have to keep every monthly statement forever)

Maybe another day we’ll tackle where to keep your few remaining important papers. Hint: we’re probably not going to tell you to keep them in a safe deposit box.

Some Things You Could Throw Away

AUGUST 4, 2014 VOLUME 21 NUMBER 28

Our clients often look over the piles of paper (old financial records, mostly) accumulating in their homes, and ask us whether they really need to keep all that stuff. Is it important to hold on to all those documents for legal, tax or other reasons?

Sometimes, by the way, the question comes from clients who are cleaning out their parents’ homes. True story: when my own mother moved from her home of almost fifty years a few years ago, I helped clean out closets of old files and records. I found my parents’ check register from the month I was born (and, of course, months and months before and after). Excited, I figured I could find out how much they paid the doctor. Not having found an entry, I am now mostly worried about being repossessed.

But back to our question. What do you need to keep? Here are a couple things to keep:

  • Tax records for the past seven years. Why seven years? Because the federal statute of limitations for taxes is generally six years (that’s not quite right, incidentally, but assuming you are not committing tax fraud you can rely on that figure), and keeping one extra year makes sure you have documentation if something does come up. But before we move on, let’s make a couple points here: your old bank statements, cancelled checks for non-deductible items like utilities for your home, and an awful lot of the paper people tend to throw into the “tax” file are simply not important for tax purposes. And keeping what you do keep in an electronic format is perfectly fine. So you can probably clean out quite a bit of that “tax” file, too.
  • Original documents with independent significance. What do we mean by that? Wills, trusts, powers of attorney, deeds, auto titles, birth certificates, marriage licenses, death certificates — all of these can be needed to prove the date and circumstances of the underlying events, or to effect your wishes. Keep them. Copies can mostly be discarded (with a couple exceptions — see the next point).
  • Copies of important documents if you don’t have the original. Don’t have an original death certificate for a parent or spouse who died years ago? OK — then keep that photocopy. It won’t be useable as a copy, but it will be helpful in the effort to get a new certified copy. Also keep copies of wills, trusts and powers of attorney if you don’t have the originals — copies of your trust and powers of attorney might be just fine, and even a copy of your will can be used if your heirs can convince the court you lost the original, rather than tearing it up. By the way, if you can’t find the original of your will, that might mean it’s time to make an appointment to update your estate plan. But that’s a different issue.
  • Receipts showing payments for improvements to your home. Not a big deal for most people, but this one can make a difference. If the gain on your home is going to be substantial, or you will sell it more than five years after you move out, then you will want to be able to show how much you spent on improving the house. This won’t make a difference for most people, but it will for a few.
  • Electronic copies of at least some of the things you plan on throwing away. Don’t bother to scan everything, but you might make a pile of documents you think you might regret destroying later, and scan that pile.

That’s not a complete list, but it does include most of the things you actually have to keep. For more detail and some other suggestions, consider the federal government’s suggested list of things to hold on to. We like their description of a process (collect all your papers from around the house and make three piles — “Active File,” “Dead Storage” and “Items to Discard”) but we think following their advice will still leave you awash in unnecessary paper.

So what can you actually throw away? Maybe it will help if you start with the stuff you just don’t need to keep any more. We have some suggestions for the discard pile, but first we want you to think about creating two separate piles of documents you’re not going to keep: one for the trash (or recycling), and the other to be shredded. Anything with an account number (even a closed account) or any personal information should go into the “shred” pile.

Things you could throw away or shred, as appropriate:

  • Old bank records. By “old” we mean not likely to be needed for tax returns, so anything seven years old is safe to shred. Even more recent records can be shredded if you’re a little selective. Bank statements more than three years old are safe to shred, as are most cancelled checks. Does your bank make statements available online? Then shred them all.
  • Unnecessary copies of important documents. Do you have your original will, trust, house deeds at hand? Put them in a safe place and shred all the copies you have lying around. They are more likely to confuse your family and heirs than to be helpful. But keep track of those originals, please — and keep the copies (of current documents ONLY) if you have already misplaced the originals.
  • Appliance manuals. We know — the federal government is very clear about keeping these documents so long as you have the appliance. That is probably because the federal government has not heard about the internet. And when you finally replace your refrigerator, will you remember to pull out the ten-year-old manual and send it with the appliance? Of course not. OK — keep the current ones if you want, but throw out the ones for appliances you have discarded over the years. At the same time you might hunt for that pile of now-useless remote controls and plug adapters, and throw them out, too.

This is a good topic, and we will probably revisit it on another occasion. In the meantime, maybe you have your own suggestions for things you think people hold on to too long. But let us just make one more point about that federal government list of things to hold on to: we think the idea of writing down all your passwords and keeping them in a safe place is a mistake. And that’s another topic for a future entry.

Oh, and remember: we periodically schedule a shredding day for our clients. We invite clients to bring in their personal documents for shredding, and we add them to our commercial shredding bin. Interested? Check with our office for the next date, and start building your “shred” pile.

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