A well-organized system for keeping your family records can pay big dividends when you need to find an important paper NOW. When saving records, first determine what to keep. With each piece of paper, ask yourself two questions: What could happen if I don't have this particular piece of paper? Will it cost me more to replace this piece of paper rather than keep it? WHEN IN DOUBT, DON'T THROW IT OUT.

In general, the following records should be retained permanently:

• Income tax returns, worksheets, and documentation for deductions. The Internal Revenue Service recommends keeping records for three years. However, tax records are often useful in divorce proceedings and other situations in which your financial history is relevant. After tax returns have been prepared, store them with all documents showing proof of deductions taken. This includes statements from mortgage holders, real estate tax notices, canceled checks or imprint check copies, and receipts.
• Plan permanent storage of all records that might be used as proof of ownership, such as deeds, mortgages, purchase agreements, and canceled checks.
• Keep proof of debt repayment, including canceled checks for insurance accident reports and claims and retirement and pension records.
• Retain proof of date and price of purchase for all investments or other property that might be sold someday or transferred to heirs.
• Store correspondence relating to legal and important matters.

HOUSEHOLD RECORDS TO KEEP IN CURRENT YEAR

These include budget for the year and paid utility bills. For instance keep canceled checks not needed to prove a tax deduction, or payment of a loan or large bill for one year. Other household records need only be kept on currently owned items. These include credit cards and charge accounts, insurance policies, vehicles, household furnishings and equipment and keys for those items.

RECORDS THAT NEED PERMANENT STORAGE AND ANNUAL UPDATING

• Employment benefits plans
• Financial plans and lists (such as address, safe deposit box contents)
• Household Inventory
• Living Will or Power of Attorney for Health Care
• Wills and estate plans
• Health insurance
• Employment information
• Education records
• Military service status
• Developing a plan for saving records will save hours of searching when they are needed.

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