The Caregiver’s Guide to Organizing Financial Records
Do you know your current bank account amount at this exact moment? Have you saved the receipts from every credit card purchase you’ve made this month? Where is your tax return from three years ago?
If you’re like most of us, much of your most important financial information is probably spread out, involving multiple companies, accounts, passwords, websites, and even old-fashioned filing cabinets. Now, imagine trying to get a grasp on all the financial information for a person you care about – like an aging parent or friend – and you’ll immediately get a sense of what an intimidating task that might be.
Adding to the challenge is the delicacy of the situation, especially when it comes to financial documentation. People tend to get a little nervous when loved ones start asking about bank accounts and investment portfolios. However, just as with other important documents (like a power of attorney or will), it’s best to discuss these things while your loved one is healthy and in good mental condition so that they can communicate their knowledge and desires effectively.
So how do you breach the subject?
Rather than jumping right into financial discussions – and possibly causing paranoia or fear of a loss of control – you should start with more general discussions on other personal documents. For example, simply ask your mom or dad where they store their marriage license, their living will in case of an accident, records of their military service, etc. These non-threatening documents may open the door to discussing financial records as well.
Which documents should you keep?
Once you have the conversation started and have begun the gathering phase of your document consolidation, you can start zeroing in on locating important financial documents, including:
- Assets and sources of income (pension funds, IRAs, 401(k)s, interest, etc.)
- Bank accounts/safe-deposit box (including location of key and list of contents)
- Mortgage papers
- Investment records
- Property tax information
- Negotiable securities
- Credit cards
- Most recent income tax return
- Loans, payments and balances
- Insurance information
- Location of originals for car titles, deeds, etc.
- Name and contact info for financial advisor if one exists
Once you’ve gathered the documents (it’s always a good idea to make a copy or two while you have them in your possession, and store in a different location in case of fire or flood), consider the best method and location for storage. A good option is always a safe deposit box at a bank; however, if the box is reserved only in the name of your loved one, you might not have immediate access to it in the case of an emergency or, unfortunately, death. A more accessible option is a small, fireproof safe to be kept in the home. If your loved one already owns one, be sure they give you the unlock code or tell you where it is stored. An added bonus would be a list of all items stored in the safe.
How long do you need to keep which documents?
While you are sorting through old records and documentation, it’s a good idea to keep a paper shredder nearby to dispose of old records you no longer need. Shredding helps ensure the private information does not fall into the hands of an identity thief who often search garbage for old personal records. Before you shred, consider the different recommended lengths of time to retain certain documents. For example:
Tax Returns: Save for 3-6 years (the IRS can request your records for up to 3 years if it suspects a good faith mistake, and up to 6 years of records if it suspects you’ve under-reported by 25% or more)
Credit Cards Receipts and Statements: Save all receipts from purchases until you receive your monthly statement, then shred the receipts if the statement reflects them all correctly. Keep the statements for 7 years if any of the charges are tax-related.
Bills: Typically, you can shred a bill once the check you’ve used to pay it is returned to you, unless it’s for a larger item (like jewelry, appliances, cars, antique, etc.) for which it should be saved indefinitely for insurance appraisal purposes.
Bank Records: Go through your checks once a year and save anything that relates to your business, taxes, mortgage, or home improvement; shred anything else that has no long-term significance.
How do you communicate with all involved?
Throughout this process, remember to reiterate to your loved one that your efforts are not an attempt to take over; instead let them know that you are there to help them and to ensure that their wishes get honored for as long as possible. Consider showing them how to check their bank balance via phone, and remember that some age-related diseases like Alzheimer’s disease can change a person’s personality and increase paranoia.
Keep meticulous records of any financial activity you conduct on your loved one’s behalf, or if they begin “paying” you for your caregiving (including reimbursing you for groceries, gas money, prescriptions, etc.). If you hire a friend of relative to start keeping the records or even paying certain bills, make sure to (politely) check their work as you would for any financial professional. Transparency is the key to help alleviate paranoia or any concerns from other family members (unfortunately, money can bring out suspicion and the worst in people).
Helping your loved one get organized while they are in good health can make things easier down the road for everyone involved, so take the time to start the process now. You’ll be glad you did the first time you need to locate a tax return from two years ago.