If something were to happen to you tomorrow, would your loved ones know how to access your important records? Would they know which accounts you hold and where your money is? What about insurance policies?
You may have your records organized in a way that works for you, but imagine what your loved ones would face if you weren’t around to show them where everything is. This is why an important part of legacy planning is organizing your files so the people closest to you can access them.
Here are six tips for organizing your records.
1. Make Room
To start, you’ll need a place to put all of your documents. Technically, a shoebox qualifies… but a better system could be a dedicated drawer or filing cabinet to hold everything, organized by file folders.
If you prefer digital records, set up a similar filing system on your computer. Make sure your loved ones know how to get into your computer and have the passwords for your key accounts.
2. Gather Documents
If your documents are scattered in different places, bring them all together in one.
3. Set Up Your Files
Give each file folder a name corresponding to a category of documents. Examples include:
- Unpaid Bills
- Credit Card Statements
- Receipts for Items Purchased
- XYZ Bank Account Statements
- ABC Brokerage Account Statements
- IRA Statements
- Life Insurance Policies
- House Records
- Health Records
- Automobile Records
- Tax Returns
… and so on. Create as many categories as you need, and create subcategories if you wish.
4. Decide How Long You Need to Keep Each Document
If you’ve been living without a good filing system, you may be keeping every piece of paper that comes in, for fear you might throw away something important. After doing this for years, you may be living with the consequence: too many papers!
The day has come for you to go through your documents and figure out what you need to keep and what you can throw away.
Allocate sections of your file drawer to short-term files and long-term files. Short-term files are for the current calendar year and will hold such items as unpaid bills, paid bills, bank statements, credit card statements and receipts for items purchased during the year.
At the end of the year you can toss some of these papers, such as utility statements and receipts for items that you know you will not be returning to the store, are not tax-deductible, or are not associated with a warranty or major home improvement.
The papers you are keeping, such as bank statements, credit card statements and receipts for home improvements, will be transferred to your long-term files.
Your long-term files should be kept in a fireproof safe or filing cabinet, preferable a portable one that you can grab in case of disaster or emergency.
Also in your long-term files will be your vital documents, such as passports, birth certificates, marriage certificates, divorce decrees, Social Security cards and military records.
5. File Your Documents
Once your folders are all set up, it will be a simple matter of putting each document where it belongs. If you encounter a document that doesn’t quite fit in any of your existing categories, create a new file folder. Keep doing this as much as you need to.
6. Stay On Top Of It
Once you have a manageable system in place, it will be easy to stay on top of it.
Remember to empty the short-term folders at the end of the year, pulling out all the documents you’ll need for tax filing. Then transfer account statements to the long-term section, along with receipts for major purchases and other items that may have landed in the short-term section but that you want to keep. Receipts and statements that have outlived their purposes (i.e. are not needed for taxes) can be thrown away.
An up-to-date, well organized filing system is a gift to yourself. No longer will you have to search for a particular document when you need it because everything will be immediately at hand.
It is also a gift to your loved ones, who will be grateful to have quick and easy access to your records if the need ever arises.
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