Managing your personal and business records effectively can seem like a daunting task. Many types of paperwork are essential to keep for long periods of not just for immediate reference but also for potential legal, financial, or tax-related issues that may arise in the future. Here, we'll delve into the 7 types of paperwork that should be retained for at least 20 years, why they are important, and how to store them securely.
1. Property Deeds
Property deeds are legal documents that transfer the ownership of real estate. These deeds should be kept for:
- Proof of ownership for future sales, inheritance, or disputes.
- Tax purposes, as properties are often significant tax liabilities.
- Historical records in case the property’s title needs to be researched or questioned.
Why Keep Them for 20 Years? Property transactions might not occur often, but when they do, the stakes are high. Keeping these documents ensures you have a clear, undisputed record of ownership.
2. Legal Contracts
Legal contracts can range from business agreements, employment contracts, to wills and trusts:
- Contracts might outline terms that could affect future legal obligations or entitlements.
- They are necessary to resolve disputes, enforce agreements, or clarify rights and responsibilities.
Why Keep Them for 20 Years? Many contracts, particularly in business, have long-term implications or might require mediation or court action decades after signing. Retaining these documents ensures you can always refer back to the original agreement terms.
3. Tax Records
Tax records including returns, receipts, and related documentation should be preserved for:
- Supporting your tax filings in case of audits or discrepancies.
- Verifying income and expenditure for loans or investments.
- Addressing any issues related to estates or inheritance tax.
Why Keep Them for 20 Years? Tax laws can change, and historical tax documents can provide a basis for comparison or claims. The IRS can audit for up to 3 years, but if fraud is suspected, that period can extend to much longer.
4. Estate Planning Documents
Estate planning documents such as wills, trusts, powers of attorney, and health care directives are crucial for:
- Ensuring your wishes are followed after your passing.
- Providing guidance on your care in situations where you can’t make decisions.
Why Keep Them for 20 Years? These documents are meant to be in effect for the duration of your life or even beyond, making long-term preservation essential.
5. Retirement and Investment Records
Records related to your retirement accounts, pensions, and investment portfolios are important for:
- Tracking contributions, investments, and withdrawals for tax purposes.
- Providing proof of ownership or beneficiary rights.
Why Keep Them for 20 Years? These records help in planning for retirement and also in case of inheritance issues or disputes with financial institutions.
6. Business Financials
If you own a business, financial records like income statements, balance sheets, and general ledgers are necessary for:
- Compliance with legal obligations and regulations.
- Preparing for audits or business valuations.
- Tracking the financial health and growth of the business over time.
Why Keep Them for 20 Years? Long-term financial records provide a clear picture of the business’s financial trajectory and are vital for legal or investment-related inquiries.
7. Educational Records
While not directly related to financial matters, educational records can have long-term implications:
- Transcripts and diplomas might be needed for further education, certifications, or employment verification.
- Financial aid agreements can impact tax deductions or scholarship requirements.
Why Keep Them for 20 Years? Educational records can influence career paths, and keeping them ensures you have access to proofs of education or training when needed.
📝 Note: When storing documents, consider using a fireproof, waterproof safe or digital storage with secure backup solutions.
📝 Note: Always review your records periodically to ensure they are up-to-date and accessible.
Keeping these documents for an extended period like 20 years might seem excessive, but the potential implications of losing them or not having them available can be far-reaching. From legal disputes to financial clarity, these records form a crucial part of your personal and business history. Ensuring they are stored securely, with both physical and digital backups, will provide peace of mind and preparedness for any eventuality.
Why are property deeds important?
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Property deeds are vital because they serve as legal proof of ownership, crucial during property transactions or legal disputes involving the property.
Can I keep these documents digitally?
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Yes, you can keep documents digitally, but it’s recommended to have both physical and digital copies for added security and in case of digital failures or breaches.
How often should I review my important documents?
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It’s advisable to review your important documents at least annually to ensure they are current, updated, and that you can easily access them when needed.
