Downs Law Firm, P.C.

hoarding and estate planning

Record Keeper or Hoarder?

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There’s a fine line between holding on to important financial and medical records … and hoarding.

Somewhere there is a line between being a great record keeper and being a hoarder. Let’s take a look.

Some people like to start their New Year off with a clean slate, going through the past year’s files and tossing or shredding anything they don’t absolutely need. However, many don’t, in part because they are not sure exactly what documents they need to keep, and which one they can toss. This article from AARP Magazine provides the missing information so you can get started: “When to Keep, Shred or Scan Important Papers.”

Tax Returns. Unless you’re planning on running for office, the last three years of tax returns and supporting documents are enough. That’s the window the IRS has to audit taxpayers. But there are some exceptions: if you are self-employed or have a complex return, double that number to six years, which is how much time the IRS has to audit you if it suspects something is fishy.

Regardless of how you earn your income, visit MySocialSecurity.gov account before shredding to make sure that your income is being accurately recorded. Having your tax records in hand will make it easier to get any figures fixed.

As for documents regarding homeownership, keep records related until you sell the house. You can use home-improvement receipts to possibly reduce taxes at that time.

Banking and Investments. If you or your spouse might be applying for Medicaid to pay nursing home costs, you’ll need to have five years of financial records. That includes bank statements, credit card statements, and statements from a brokerage or financial advisors. This is so the government can look for any asset transfers that might delay eligibility. Keeping these statements is NOT being a hoarder.

If that’s not the case, then you only need banking and financial statements for a year, except for those issued for income-related purposes to provide the IRS with a record of tax-related transactions. Your bank or credit card issuer may have online statements going back several years. However, if not, download statements and save them in a password-protected folder on your home computer.

Stock and bond purchases need to be kept for six years after filing the return reporting the sale of the security. Again, this is for the IRS.

If you have a stack of canceled checks, shred them. Most banks or credit unions today keep electronic versions of your checks.

Medical Records. These are the records you want to keep indefinitely, especially if you have had a serious illness or injury. The information may make a difference in how your physicians treat you in the future, so normal or not, hang on to the following documents: surgical reports, hospital discharge summaries and treatment plans for major illnesses. Put these in a password-protected folder in your computer or a secure cloud-based account, so they can be shared with future healthcare providers. You should also keep immunization and vaccination records. The goal is to have your own medical records and not rely on your doctor’s office for these documents.

Maintain proof of payments to medical providers for six years, with the relevant tax return, in case the IRS questions a health care deduction.

Setting up and calendaring a schedule to annually purge your records reduces any hoarder predispositions you have.

Reference: AARP Magazine (August 5, 2019) “When to Keep, Shred or Scan Important Papers”