Say you’ve been administering an estate. Maybe you have been appointed personal representative in a probate proceeding. Or perhaps you’re the trustee wrapping up a trust after the death of the settlor. What do you have to do with estate documents?
You have to behave reasonably, first of all. But what does “reasonable” mean in the context of modern document storage?
What kinds of estate documents are we talking about?
Estate administration — whether probate or trust administration — can generate an impressive amount of paper. There are also often dozens of emails, receipts for expenditures you have made, and maybe batches of faxes. There might be links to pictures, forms and more. Do you have to keep those estate documents forever?
And what difference does it make whether there is a court proceeding (i.e.: a probate filing)? Are documents from a probate case more important than, say a relatively informal trust administration?
There is no simple and comprehensive answer. And of course you will need to make adjustments in cases with contentious parties, or proceedings outside Arizona (we don’t know what your local court might require, for example).
Some guidelines
Nonetheless, we can offer some general suggestions. The first is: keep electronic copies of everything, forever.
Well, of course that’s not what we really mean. But digital storage is plentiful, accessible and cheap. Estate documents can also be searched electronically, making storage more practically useful.
But what if you change your email address, or a hard drive crashes, or you lose a password? Does that mean that you’re in trouble?
Probably not. First, there is no estate cop checking up on you just to see whether you have complied with minimum standards. And the time for most objections and complaints is short. The opportunity for problems diminishes rapidly as the estate administration concludes.
That doesn’t mean that we encourage you to be cavalier about storage of estate documents. But we also don’t want you to obsess, or to wake up in a cold sweat in the middle of the night. There’s a pretty high likelihood that no one will need to see any of your files anytime after a year or so.
Even taxes?
OK — you got us there. You should make sure you keep copies of estate documents used in preparation of tax returns for at least the six years that the Internal Revenue Service can go back to look at. Not that they do that very often. In fact, we can’t think of a case where we (or a client) have had to produce documents more than a year or two after the estate was closed.
More likely might be the need to establish the tax basis for property estate beneficiaries inherited. The value listed in your estate (probate or trust) accounting for value at the date of a decedent’s death will later be important for heirs and beneficiaries. Of course, you should provide them that information when you make in-kind distributions — but they’re more likely to misplace those notes than you are.
Here’s an important point to consider: the personal representative or trustee has potential personal liability for failing to properly file taxes. That means you might be defending yourself with the IRS up to that six-year limitations period — and more, if they suspect fraud. So keep good records.
What about paper?
Do you have to retain paper copies of everything? No. In fact, very few pieces of paper have individual value or importance. A few exceptions to that rule:
- Death certificates. It’s not that the original death certificate has magical powers. It’s just that it can be very hard and very expensive to get new ones. And after the estate administration is over, you might not even have any authority to request one. So don’t shred those death certificates without thinking long and hard. Or at least retain one.
- Birth certificates, marriage licenses, military records (like the DD214). Again, you might not ever need them, but they are hard to replace. It’s not important that hunt one down or request it now, but if you have it, hold on to it.
- Handwritten notes, especially by the decedent. It’s not too likely that there are any that are that important, but if you have some hold on to them for a reasonable time.
- Title records from states that still require detailed title searches (NOT including Arizona). In one estate we handled, for instance, the decedent had owned five parcels of real estate in another state, and each title records packet filled a separate safe deposit box. We learned that each would cost several thousand dollars to replicate. Arizona doesn’t require that kind of paper history.
Some things that (counterintuitively) you probably don’t need to keep in paper form:
- Deeds. At least for Arizona properties. If the deed was recorded, it doesn’t matter where the original paper is now.
- Wills. If there’s been a probate, the original will was filed with the court (and you don’t get it back). If there was no probate, hold on to the will just in case for a year or two, but don’t worry; the fact that you have a scanned copy can show that the will was still in existence after the decedent’s death. Plus it’s unlikely to come up.
- The trust and amendments. Digital copies are fine.
- Bank records. Download or scan and shred them. Just like you do with your own accounts.
- Court records. Did you file it with the court? It’s still there.
How to dispose of estate documents?
Shred ’em. Make sure you have scanned copies, make a big pile and feed them to the shredder. Or, if you’re our client, call us about using our bulk shredder. We’re pretty generous — and we love shredding paper.
That’s it. There’s no real magic, and no one monitoring your compliance. If no one ever asks for copies of estate documents, you will never have to face the problem. And if they do, the odds are very high that a scanned or downloaded copy is fine.
If you ask “but how long should I hold on to the digital copies?” we’ll suggest that maybe a couple of years is sufficient (except possibly tax records, as we described above). If you ask how long you need to keep paper copies, we have a question for you: have you scanned or downloaded everything you have in paper? No? OK — hold on to the paper for at least two years. Or scan it and shred it sooner.
