Private Business Counsel

Ok, so you’ve streamed everything you’ve had on your “to watch” list.  You’re caught up on your reading.  You figure you’ll do the deep clean you’ve always dreamed of and have just finished the attic and even under the kitchen sink.  Your hangers and paper clips are as untangled as the rules of physics will allow, you’ve discarded 36 out of the 37 bags of bags you thought you couldn’t live without, and your ball of rubberbands is on the verge of record-breaking.

Finally it’s time to confront the great unknown – paper.  You have tax returns going back to college, bank and broker statements that are so old they have courier font and utility bills that date back to the Baby Bells.  What do you do with all the paper?  There are no hard and fast rules and the answers will differ depending on your situation and the specific piece of paper, but here are some suggestions to consider:

1. It goes without saying that you should shred any piece of paper that you no longer need which contains personal identifiers such as account numbers, dates of birth and social security numbers (even just the last four).

2. Anything that is available online and will continue to be available online, you can recycle or shred.

3. Scan anything which there is any chance you might need and be sure to save it in a format so you can easily retrieve it years from now.

4. Bank and broker statements, and, in particular, cancelled checks, are generally available online or from your financial institution for some period of time. That period will vary by financial institution.  Generally, the only information you will definitely need is tax information and that is provided on a 1099, so statements can generally be shredded after a few years.

Sometimes, though, questions will arise about income tax basis.  Basis is typically based on the purchase price of a security and is essential for determining capital gain or loss when the security is sold.  In some cases the 1099 issued by the financial institution will reflect an incorrect basis or no basis at all.  That is more likely if the assets in the account were transferred from another financial institution or were inherited.  It is advisable to scan statements showing transfers from one financial institution to another and to maintain statements reflecting significant investments.  You should check with your bank or broker if you have questions about what basis information they have and what the source for such basis information was.

5. The rule of thumb with income tax returns is to retain them for three years, but many practitioners recommend seven years. If your income tax returns are prepared professionally you should find out from the firm or service which prepares your returns what their policy is on document retention.

6. It is difficult to make a blanket statement about retaining legal documents such as deeds, wills, litigation papers and the like. In many cases the law firm that was involved has copies of these materials, but most law firms will shred these documents after some period of time.  All original and active documents – such as your most recent will – should be kept in a secure and fireproof location.  If your lawyer has a will safe, you might ask the law firm to retain the originals.

7. Deeds are almost always recorded with the Recorder of Deeds so there is no need to hold onto those, but in order to have easy access to them it is a good idea to scan them. You should maintain a copy of the settlement sheet for the purchase of any real estate you currently own.

8. Adoption papers, divorce decrees, and final court orders or settlement agreements in litigation should be retained. While these items might be available from the courthouse, obtaining copies from the court can be burdensome and costly.

There are of course many other categories of paper to think about, not to mention family letters, pictures and other memorabilia.  Fortunately, the ability to scan can help avoid regret.