FAMILY RECORDS:
What to Keep Where and For How Long
HE-445 (Revised), May 1998
Debra Pankow
Family Economics Specialist
Families are minibusinesses!
Families perform the same tasks as businesses -- they plan, buy, save and invest -- but
usually on a smaller scale. That is why keeping family records is just as important as
keeping farm or business records.
Why Should You Keep Records?
Keeping family records in a business-like manner saves time, trouble, money and
frustration. Record keeping is important because:
- Income tax preparation requires information on tax deductions; records substantiate
deductions.
- Death, fire or theft may call for records to establish ownership; records help in estate
settlement and insurance or benefit claims.
- Records document certain transactions; if someone makes a mistake or official records
are destroyed, your records may be needed.
- Records could shorten the time it takes to collect insurance, military benefits,
veteran's benefits or an income tax refund.
- Evaluating past records provides information for planning future spending. Records
provide a summary of your financial situation and can help you keep a close tab on where
the money goes.
What Kind of System Is Needed?
Use a system that fits your family's lifestyle. The family finance center might be as
elaborate as a home office or as simple as a drawer in the kitchen or a file cabinet in
the family room.
It is important to decide who will take major respon-sibility for record keeping in the
family. All members -- including children old enough to understand -- should know how the
record-keeping system works and how information can be found easily. Some of the tasks can
be shared or delegated, but one person with the skills and interest should take the
leadership.
Develop a regular schedule for bookkeeping and resolve to stick to it. A routine will
actually reduce the amount of time you spend on record keeping.
A well organized record keeping system will eliminate confusion when important papers
are needed. Getting started on a record keeping system may be time-consuming, but once it
is set up to meet your family's needs, maintaining the system will be easy.
How Does One Organize A Record System?
Some basic records should be carried with you at all times. Your wallet, billfold or
purse is a small record system. Keep identification with you, including your driver's
license, name of person to notify in case of an emergency, credit cards, social security
card and organization membership cards.
Health, accident and auto insurance information, and information on allergies, health
problems and blood type should also be carried with you.
Other records require a different approach, but the approach does not need to be
difficult. Use NDSU Extension Service circular HE 446, "Inventory of Important Family
Records," as a guide for what type of records to keep, and then as a record of where
these records can be found.
The easiest way to keep track of your family papers and business records is to set up a
filing system. A place to store file folders is more important than a fancy desk. A metal
filing cabinet, an under-bed storage chest or cardboard box, or an accordion folder will
do the job as well as a desk drawer.
Gather your important papers from throughout the house. Divide your file folders into
three major areas:
Current financial records
Inactive financial records
Permanent records
The current files should include employment records, credit card information,
insurance policies, family health records, warranties and guarantees, education records,
bank statements, a household inventory, tax records and canceled checks. These headings
may be used as a basis for your filing system.
The inactive files are used to store the items from the current files that are
three years old. Go through the current files once a year. Discard unneeded items and
transfer others to inactive storage. A good time to make transfers is the first of the
year, when you work on your income tax forms. File headings would be the same as for
current files.
Permanent records are Very Important Papers, ones which
should be kept safe -- in a safe deposit box or in a fireproof (and waterproof) storage
container.
Every family's file folder labels will be different. Divide each area into categories
that make sense to you. Circular EC-510, "A Farm and Home Filing System for North
Dakota Farm Families," may help you get organized. Feel free to add to or change your
file labels to better meet your family's changing needs.
A good record keeping system will allow someone who is unfamiliar with the system to
locate important documents, maintain records and prepare reports in case of an emergency.
Very Important Papers include:
- Papers or records that prove ownership (such as real estate deeds, automobile titles and
stock and bond certificates)
- Birth, marriage and death certificates
- Legal papers (such as divorce and property settlement papers)
- Contracts
- Household inventory
- Wills
- Advance Directives such as Living Wills or Durable Powers of Attorney for Health Care
- Anything else that would be expensive or difficult to replace.
Where Should VIPs Be Stored?
A safe deposit box in a financial institution or a home fireproof safe is the best
place for your family's VlPs. Papers that cannot be replaced or would be costly or
troublesome to replace belong in this type of storage. In general, bank account registers,
canceled checks, transcripts, medical histories, employment records, tax returns and
insurance policies do not need to be kept in a safe deposit box or fireproof home storage.
How Long Should One Keep Tax Records?
The Internal Revenue Service (IRS) has a three year statute of limitations on auditing
a return. Keep all records of income or deduction expense for three years. However, if you
use the income averaging option, you may need to prove your taxable income for four base
years and if you failed to report more than 25 percent of your gross income, the
government will have six years to collect the tax or start legal proceedings. Filing a
fraudulent return or failing to file a return eliminates any statute of limitations for an
audit by the IRS. If you hire a tax specialist, check to see how many years you should
keep your records.
Keep records that show the original cost or value of your property. Also keep a record
of home improvement costs to reduce capital gains tax if your home, land or property is
ever sold for more than its original cost or value.
All canceled checks are not needed to support tax deductions. Save only those checks
that substantiate an income tax deduction, such as checks paying for medical/dental
expenses or charitable contributions. Putting a "T" for "tax" in the
memo blank of a check when you write it might help you sort canceled checks faster. In
cases where your only record is a duplicate check, you may need the monthly checking
account statement to verify that the check went through.
Keep a copy of filed tax returns. Should you need it, a prior tax return copy can be
obtained from the IRS center where you filed your return. Complete form 4506, Request for
a Copy of Your Tax Form, and pay the fee ($23.00 in 1998). From North Dakota, mail the
request to the IRS, Photocopy Unit, PO Box 9941, Ogden, UT 84409. If you have moved to
North Dakota, request the copy from the IRS center in which you filed the return you want
copied. IRS center addresses are listed in most IRS publications.
What To Keep Where and For How Long?
Records are kept in four places: in a home filing system; in a safe deposit box or
fireproof home storage; in the wallets and billfolds of household members; and in each
vehicle owned (refer to the Guide for Family Records).
Guide for Family Records
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Item Where How Long
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PERSONAL and FAMILY
Birth, marriage and death Safe deposit box or Permanently
certificates fireproof home storage
Adoption and custody Safe deposit box or Permanently
papers fireproof home storage
Citizenship papers Safe deposit box or Permanently
fireproof home storage
Divorce and separation Safe deposit box or Permanently
papers fireproof home storage
Settlement agreements Safe deposit box or Permanently
fireproof home storage
Military papers Safe deposit box or Permanently
fireproof home storage
Will Signed original with As long as in
probate division of circuit effect
court or safe deposit box
(if jointly rented);
copy in home file
Advance directive Home File, Safe deposit Permanently
(living will/durable box and copies with agents (update as needed)
power of attorney and family members
for health care)
Passports Home storage or safe Until replaced
deposit box
Social security card Carry card; stub in home Permanently
storage
Diplomas, transcripts Home storage or safe Permanently
deposit box
Medical history Home file Permanently
(update as needed)
Employment records Home file Permanently
Inventory of valuable Home file; copy with Permanently
papers and advisors trusted family member (update at least
or friend annually)
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PROPERTY
Real property deeds, Safe deposit box Duration of
title papers,abstracts, ownership or longer
mortgage and other if needed for
lien documents tax purposes
(include rental property)
Burial lot deed Safe deposit box Duration of
ownership
Tax assessment notices, Safe deposit box Duration of longer
purchase contracts, ownership or
recordsof capital if needed for
improvements tax purposes
(include rental property)
Motor vehicle titles, Safe deposit box Duration of
purchase receipts ownership
and licenses
Records of auto Home file Duration of
service/repair ownership
Jewelry and other Safe deposit box if safety Duration of
valuable items of family may be threatened ownership
if kept in home
Inventory of household Safe deposit box; copy in Permanent
goods and appraisals home file (update at least
(include rental property) once a year)
Auto insurance card and In vehicle (required by Current only
registration North Dakota State law)
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FINANCIAL
Stocks, bonds and Safe deposit box; listing Duration of
other securities in home file ownership or longer
if needed for tax
purposes (usually
up to six years)
Bank accounts, account Home file Duration of ownership
registers and statements or longer if needed
for tax purposes
(usually up to
six years)
Canceled checks Home file for non-tax Three years minimum
deductible expenditures
Savings certificates Safe deposit box; listing Duration of
in home file ownership or longer
if needed for tax
purposes (usually
six years)
List of credit, ATM and Home file Duration of account
debit cards, credit or obligation or
contracts,agreements, longer if needed
records of credit payments for tax purposes
and account statements (usually six years)
Insurance policies and Home file; list of Permanently (update
records of claims made policies in safe deposit as needed)
and paid box
Copies of past tax Home file Six years minimum
returns
Receipts and records of Home file (current); Six years minimum
deductible expenses, fireproof home storage
income and tax payments after filing of taxes
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HE-445 (Revised), May 1998
NDSU Extension Service, North Dakota State University of Agriculture and Applied
Science, and U.S. Department of Agriculture cooperating. Sharon D. Anderson, Director,
Fargo, North Dakota. Distributed in furtherance of the Acts of Congress of May 8 and June
30, 1914. We offer our programs and facilities to all persons regardless of race, color,
national origin, religion, sex, disability, age, Vietnam era veterans status, or sexual
orientation; and are an equal opportunity employer.
This publication will be made available in alternative formats for people with
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