Q. How long must I keep important paperwork from a deceased person? My dad died in 2012. I have 10 years of his tax returns, paperwork from his home sale in 2009 and all the estate paperwork.
— Trying to clean it up
A. We’re sorry to hear about your dad.
Determining how long to keep paperwork can be confusing, and we’re glad you listed what you have. That’s because the time frame varies for each kind of document.
First, the tax returns.
The IRS statute of limitations for an audit of a tax return is typically three years unless there is fraud or significant underreporting of income, said Michael Maye, a certified financial planner and certified public accountant with MJM Financial in Gillette.
He said assuming no fraud, he would recommend seven years of tax records be maintained. Also keep the supporting tax documents.
“So in your dad’s case, you can go ahead and shred the older tax records that were filed more than seven years ago – the returns from 2003 through 2009,” Maye said. “I would keep an electronic copy of the actual tax returns themselves and shred only the supporting tax documents.”
Next, the home sale.
As long as the home sale was properly reflected on his tax return back in 2009, the statute of limitations of three years would apply, Maye said.
“So in theory you could shred the paperwork from the sale of his home in 2009,” Maye said. “However, if you want to be a bit more conservative, keep the paperwork from the home sale with the 2009 tax return.”
He said you can keep only paperwork related to calculating the gain or loss on the sale of the home such as selling price, selling expenses and the cost basis of the home.
This should considerably thin down the size of the home sale-related paperwork.
Now for the estate documents.
There is no statute governing how long to hold these documents, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park.
She said generally, the rule for holding paperwork is seven years after the filing of the document or happening of the event to which it relates.
That’s because seven years is usually (but not always) the time within which a legal claim or income tax audit needs to be instituted, and that’s when you might need the paperwork to support a position, she said.
“An estate tax audit generally needs to be instituted within three years of filing of the estate tax return,” Romania said. “However, once a will is probated and especially if there is no objection after the estate is administered, it is highly improbable that you will need paperwork relating to the execution or probate of the will; thus you could decide to dispose of it sooner.”
If you do dispose of the paperwork and a question later arises, the attorney involved, or the Surrogate, may still have copies of some of the paperwork, she said.
Notwithstanding the passage of seven years, you may wish to keep a death certificate and a copy of any estate tax return filed or other evidence of the date of death value of any asset you inherited, Romania said.
“When you inherit assets, the basis of the asset is its value at the decedent’s date of death; therefore, the difference between the asset’s value on the date of sale and its value as of the decedent’s date of death will be your gain or loss for income tax purposes,” she said.
So should you need to prove your basis, the decedent’s estate tax return or papers showing the value of the assets on the date of death will prove helpful, Romania said.
A copy of the death certificate showing the date of death is helpful for similar reasons, she said.
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