Don’t be too quick to shred!

There’s been a good discussion on the National Academy of Elder Law Attorneys list serve in response to a USA Today article on shredding documents. The thesis of this article, like so many others, is that shredding “unnecessary” documents after tax season is critical to prevent identity theft. So, the article suggests destroying canceled checks once the bank statements have been reconciled, holding on to records for investment transactions to show the purchase or sale price for no more than three years after the transaction, etc.

There’s just one problem with this thesis: taxes aren’t the only reason why one should hold onto records. Before you purge, think ahead.

MassHealth applications for long-term care services require the applicant to produce five years of records., including tax returns, invoices for purchases in excess of $500, bank statements, canceled checks, credit card statements, etc., etc. If this information is not supplied with the application, the application will be rejected. I’ve lost track of the number of times I’ve asked clients to produce documents needed for a MassHealth application only to be told that they’ve been lost or destroyed. Then there’s the problem of getting duplicates of canceled checks or old bank statements. We’ve had one small bank tell us that they didn’t issue copies of statements if the statement was at least three years old. If there is a question about whether a transaction may have been a gift, we need to supply documentation showing what was purchased so that we can argue that there was no gift made or intended. For these reasons, I recommend that seniors hold on to five full years of financial records, preferably set up in chronological order.

There are other older documents that need to be retained as well. Veterans and their surviving spouses need discharge papers to apply for Veterans Administration benefits, such as Aid and Attendance. Invoices and canceled checks for improvements to one’s home are needed at the time of sale, so that capital gains tax liabilities can be properly calculated.

Children of boomers — don’t count on your inheritance

Here’s an interesting story — a survey by a unit of Bank of America of 457 baby boomers (born between 1945 and 1964) with at least $3 million just aren’t very interested in leaving an estate for their children. Only 49% felt it was important to leave an inheritance. The rest planned to spend their savings on themselves.

Part of the reluctance to pass along their money may be that the survey respondents -– many of whom described themselves as self-made -– don’t trust their heirs with it.

Barely one-third of those surveyed expressed confidence that their children would be able to “handle” an inheritance. And 45% doubt their progeny will have sufficient financial maturity until they’re at least 35 years old.

Granted, it’s a small sample, and certainly the vast majority of Americans don’t have $3 million to leave to anyone. Still, I wonder if this is indicative of a real generational shift, or will the survey participants change their minds as they and their children age?

AARP v. HUD — an update

A follow-up to my post of March 9, in which I discussed a law suit brought by AARP against the Department of Housing and Urban Development concerning the agency’s policies about reverse mortgages. As I noted, HUD had instituted a policy in 2008 which forced surviving spouses who inherited homes but were not co-borrowers on a reverse mortgage into selling their homes if the house was “upside down” and worth less than the amount borrowed, instead of allowing them to buy out the lender for the amount of the balance, despite the fact that third parties could do so.

As of April 4, HUD published a notice reversing this policy. As a result, the borrower and the borrower’s estate is protected no matter who pays off the lender even if that homebuyer is a surviving spouse, family member or relative. This is great news for borrowers and their families, and levels the playing field.