Important Financial Documents

This past weekend I had been comtemplating selling my car (more on this in the future). However, as I thought about selling it, I got distracted as my mind then began to try to think of where I put the Title to my car that would enable me to sell it. You see, a major pain for me is staying organized.

Seeing as this is a personal finance blog, I'll stick to the subject of keeping your Financial House in order. Not only is this good come tax time, but it is very good in case an emergency happens, or if you just want to check up on things. For example, you may need a birth certificate to get a an ID of some sort, perhaps a passport.

If you're like me and you've ever spent hours/days looking for a financial document that you just had to find, you'd probably agree with me that having these documents organized would have been well worth the effort. I have compiled information from my readings that can help you know what and how long to keep some of your most important financial documents.

Copies of bills that support income and expenses for 3 years after the due date of each tax return (W-2s, K-1s, 1099s, cancelled checks for items being deducted). It's no secret that the Internal Revenue Service (IRS) audits only a tiny fraction of the millions of returns filed each year, but if you don't have supporting proof then deductions may not be allowed. Most of the above documents can be held in a fire-proof lockbox.

Other very important documents are personal records, such as birth/marriage certificates, trust agreements, powers of attorney, pictures for insurance purposes are best to be kept in a safe deposit box. However, do not keep your Will in your safe deposit box. In one of my recent classes, our Estate Planning Instructor specifically mentioned a case where a funeral had already taken place according to how the heirs wanted to do it because the decedent's Will was in a "Sealed" safe deposit box as is mandated by some states when the owner dies and the instructions for burial were contained in the Will.

Some documents should never be thrown away. Any brokerage statement, etc. that will help you establish a basis for an investment should be kept if you would like to take advantage of the more favorable methods of capital gains calculations. This goes the same for any account such as an IRA in which you would like to keep these statements until the money is withdrawn (you never know what could happen to these records). These can be kept in your safe deposit box as well.

So what does this mean for me? I've got to find the last couple of piles I have put together of important documents and get them to their proper place (safe deposit box or fireproof storage).


At 8/23/2005 10:16:00 AM, Anonymous Anonymous said...

When filing income tax returns the statute of limitations starts the latter of when the return is due or when filed. So if an income tax return is filed late or an extension is filed, then the statute of limitations doesn't start till then. Another aspect of organizing financial documents is to summarize all the info and keep it with your will. If you have assets, you should at least have a simple will. Also, minimizing risk goes hand in hand with finances. Securing financial documents from being stolen in a burglary is something I hadn't really thought much of before until I watched "To Catch a Theif" on TLC. The best way, though difficult, is to buy a safe and bolt it to the floor. Put everything like tax returns, credit card statments, ect. that a theif will use to steal your money and wreck your finances and credit.

At 8/29/2005 05:24:00 PM, Anonymous Anonymous said...

I keep a separate file folder for each car in the family which contains: the bill of sale, title, all forms from state license and city sticker updates, insurance renewals, repair orders, oil change receipts and paid parking tickets. Also the owner's manual. Everything for that car is in that file. I also keep a running list in date order of repairs & oil changes in a document on the computer.

At 8/30/2005 10:06:00 AM, Blogger Financial Fruition said...

Anon #1, thanks for the comment. To Catch A Thief" is a great show that makes you "wake up" regarding the security of your residence and your valuables

Anon #2, great idea, thanks for the comment as well.


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