In my last blog I talked about the critical documents you should gather, update and organize for your aging parents and yourself.  This time I’ll discuss ways to securely maintain those documents, how long you need to keep them, and the best way to destroy them once you no longer need them.

Maintaining documents

Some documents are best kept in their original paper form, for example, birth and marriage certificates; titles; wills; and powers of attorney. Other paper records can be scanned and maintained electronically.

When deciding where to store documents, consider both accessibility and protection in the event of fire or burglary. You may want to keep copies of the most critical documents with your parents’ attorney, a safety deposit box or with you, just in case.  For those critical documents (paper) you keep in your parents’ home, be sure they are in a locked drawer or filing cabinet. Better yet, keep them in a fireproof and waterproof safe.

For electronic documents, to keep them private you should encrypt the files and hide the encryption key. Also, be sure you back up the data either in the cloud, on an external hard drive or a thumb drive (so every family member can have a copy).  Better yet, use the “rule of 3” and keep 3 backup copies that are in different locations! One of those could be a thumb drive stored in either a safe deposit box or some other secure fireproof and waterproof location.

Document retention

Here are some general guidelines for how long to retain records. For more information, go here: (http://www.bankrate.com/finance/personal-finance/how-long-to-keep-financial-records.aspx)

Financial documents

• Tax returns: 7 years. The IRS has 3 years from your filing date to audit your return if it suspects good-faith errors. It has 6 years to challenge your return if it thinks you underreported your gross income by 25% or more. If you discover a mistake and want to file an amended return, you have 3 years from your original filing date to do so. You should keep canceled checks and receipts relative to your return with the return.
• IRA contribution records: Permanently. If you made non-deductible contributions to an IRA, keep the records so when you withdraw you can prove you already paid taxes on the funds.
• Retirement/savings plan statements: Keep quarterly statements until you match them up with the annual summary at the end of the year. Keep annual statements until you retire or close the account.
• Bank records: If you still receive physical checks, go through them at the end of the year and keep those related to taxes, business expenses, home improvements and mortgage payments. Shred the rest.
• Brokerage statements: Keep until you sell the securities.
• Bills: A year.
• Credit card and loan agreements: Keep as long as the account is active.
• Home/car insurance: Keep until you receive the next policy.

Other documents

• Medical: Keep active for one year, then permanently archive.
• Proof of ownership: Keep active until you sell the item. Then permanently archive.
• Proof of identification: Permanently.

Destroying records

It is very important that you permanently destroy personal records that you no longer need. Identity thieves can have a field day with documents dumped in the garbage or hard drives that haven’t been stripped.

Shred or incinerate your paper documents. If you shred them, use a confetti-cut, cross-cut or diamond-cut shredder to ensure that the pieces are such that they can’t be easily put back together. You may also want to consider taking large amounts of shredding to a facility that guarantees and certifies that your documents are fully destroyed. There are also services that will come to your home. The Federal Trade Commission offers more information on what and when to shred in “A pack rat’s guide to shredding” (https://www.consumer.ftc.gov/blog/pack-rats-guide-shredding)

If you keep your critical documents on a computer, be sure that all of your files are encrypted and that the encryption key is on a separate device.  To destroy electronic files you need to do more than just delete them. You’ll need to use specialized software. Before recycling or selling your old computer, ensure that you’ve permanently destroyed all personal data.  If you back up documents in the cloud, check with the provider to learn about their data destruction policies, and make sure you understand their privacy policy and terms of service.