Your Important Papers: What, Why, and How Long to Keep

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The following article about keeping valuable papers safe (especially in time of emergency) was provided by Colorado State University (CSU) Extension and written by N. Porter, a CSU extension specialist of financial resource management, and L. Kubin, a CSU Extension county director.

Quick Facts...

  • A systematic plan for keeping track of important documents can save you hours of anxious searching for misplaced items.
  • It is important to carefully store valuable papers which would be difficult or time-consuming to replace. These hard-to-replace documents are ideally kept in a safe deposit box or a fire-proof, water-proof, burglar-proof home safe or lock box.
  • Electronically stored records must be legible, readable and accessible for the period of limitations required. It is important to back up electronic files in case of a computer malfunction.
  • Wherever you live there is always the risk of fires, floods and other disasters, and your home and important documents could be totally destroyed. Assemble a ‘Grab-n-Go’ emergency bucket, box, tote, backpack, or electronic storage device (USB ‘jump’ drive) to have available on short notice.

Important papers prove certain events occurred and they are used to document financial transactions. They may be needed at various times during one’s life. For example, a birth certificate is used to prove age when starting school, to obtain a driver’s license, or to apply for Social Security benefits. It is also needed by relatives to obtain a death certificate. Financial records are the key to your credit standing, essential to helping save money on income taxes owed, and provide an indication of your financial progress through life.

A systematic plan for keeping track of important documents can save you hours of anxious searching for misplaced items. It can also help you reduce the amount of non-important papers cluttering your home.

Valuable papers can be sorted into two types: those needed for day-to-day use and those needed occasionally. Examples of valuable papers used frequently include a driver’s license, credit cards, health insurance card, bank account records, identification card and special health documentation such as for allergies, disabling conditions and blood type. Examples of valuable papers used occasionally include birth, marriage and death certificates; deeds; leases; contracts; insurance policies; military papers; divorce decrees; Social Security records; and wills.

It is important to carefully store valuable papers that would be difficult or time-consuming to replace. These include items like original birth and marriage certificates and property titles. These hard-to-replace documents are ideally kept in a safe deposit box or a fire-proof, water-proof, burglarproof home safe or lock box. Other important records may be filed at home or carried in a wallet or purse. These records and papers are those needed for identification purposes or for emergency medical treatment.

People often keep a combination of paper and digital records. Digital records are kept by storing electronic images on an electronic storage system like a computer hard drive or portable drive. According to the IRS (See IRS Publication #552, ‘Record-keeping for Individuals’) all requirements applying to hard copy records also apply to electronic storage systems which maintain tax books and records. Electronically stored records must be legible, readable, and accessible for the period of limitations required (see Chart 1). It is important to back up electronic files in case of a computer malfunction.

Regardless of how records are stored, regular filing and review of documents is important. Making the decision on when to discard old files is often difficult. Chart 1 lists records and important papers typically needed and why they are important. The chart also provides guidelines on how long records should be kept.

Because every household may have unique situations, there is space for additional records at the end. Due to the danger of identity theft consider destroying any documents you decide are outdated. It is important to shred or safely burn documents which contain your name, address, Social Security number, debit/credit card numbers, or other sensitive financial information.

Having your important papers organized and accessible can help you in many ways. If you are meeting with an attorney or financial adviser, you can prepare for the discussion and perhaps reduce the total cost of the consultation. If something should happen to you, it allows a loved one or trusted designee to readily locate durable and health-care powers of attorney, insurance policies, medical records, estate plans, and outstanding bills. See the eXtension web page ‘Organize Your Important Household Papers’ for more information.

Wherever you live there is always the risk of fires, floods, and other disasters, and your home and important documents could be totally destroyed. Prepare yourself so you can minimize the impact. Assemble a ‘Grab-n-Go’ emergency bucket, box, tote, backpack, or electronic storage device (USB ‘jump’ drive) to have available on short notice. This emergency pack should contain hard copies or electronic images of important papers to quickly take when evacuating: credit and banking information; driver’s licenses; birth certificates; insurance information including auto, health, medical, and home; important medical information such as medication and immunization records; personal property inventory with photos or videos; list of usernames and passwords for accounts accessed on the Web. See fact sheet 9.156, Financial Emergency Preparedness for a form to complete with this important information. It is recommended that you also have an extra set of keys for your autos, home, safety deposit box or safe; and enough cash to purchase fuel for auto, food, toiletries, and lodging for several days.

Chart 1. Important papers: what, why, and how long to keep?

*Note: The Internal Revenue Service has three (3) years to audit Federal income tax returns (or two years from the date the tax was paid, whichever is later). However, this limit does not apply in ‘unusual’ cases. If an amount of income which should have been reported was not, and it is more than 25 percent of the income shown on the return, the period of limitation does not expire until six (6) years after the return was filed. There is no time limitation when a return is false or fraudulent, or when no return is filed. (See IRS Publication #552, ‘Record-keeping for Individuals’).

While you do not have to keep all possible financial records for tax purposes, if audited you will want to have cancelled checks or other verification of payment relating directly to entries on your tax return. In some cases, it is advantageous to keep records longer than the recommended period. For example, when selling your principal residence and claiming the capital gains exclusion allowed by the IRS, documentation of original purchase price and capital improvements may be required.

**Check with your insurance agent /broker for company requirements of proof of purchase and/or ownership of real and personal property in the event an insurance claim is filed. (In some cases, payment receipts are required; in other cases a written inventory and/or photographs is adequate documentation.)

***Contents of a safe deposit box usually are not covered by Federal Deposit Insurance Corporation (FDIC) insurance. Check with your insurance agent/broker regarding coverage under your homeowner’s insurance policy or to determine if other coverage provisions are available.