An executor I once advised was standing in her late father’s apartment on the Upper East Side, looking at four filing cabinets packed with decades of financial records. Her question was simple: “What can I throw away?” As the person responsible for settling his estate, she felt the weight of every folder. Shred too much, and she might expose the estate to future liability. Keep too much, and she would be buried in paperwork irrelevant to her duties.
This is a common position for an executor. The role is one of stewardship. You are the temporary custodian of a person’s financial legacy—your duty is to act prudently to protect it. Deciding what records to keep, and for how long, is one of your first and most critical responsibilities.
The IRS Look-Back Period Is Just the Starting Point
Most people have heard the general IRS guideline: keep tax records for three years. The clock starts from the date the return was filed or the tax deadline, whichever is later. For an executor filing the decedent’s final tax return, this three-year rule seems straightforward. But it is a baseline, not a complete answer.
The IRS can look back further in certain situations. If an estate is found to have substantially underreported gross income by more than 25%, the look-back period extends to six years. If a return is fraudulent, there is no statute of limitations at all. For claims involving a loss from worthless securities, the period is seven years.
An executor’s fiduciary duty requires safeguarding the estate against these contingencies. Assuming the three-year rule applies without a clear understanding of the decedent’s financial history is not prudent. The tax returns themselves are only part of the story; the supporting documentation is what provides the proof needed to defend the estate against a future inquiry.
Your Duties in New York Surrogate’s Court
Beyond federal tax law, an executor in New York has duties to the beneficiaries and the Surrogate’s Court. At the end of the estate administration process, you will provide an accounting—a detailed report of every asset collected, every dollar spent, and every distribution made. Beneficiaries have the right to review and, if they see fit, object to this accounting.
This is where old tax returns become invaluable. They are a roadmap to the decedent’s assets. They can help identify previously unknown bank accounts, brokerage assets, or real estate holdings. They can also substantiate the cost basis of assets, which is critical for beneficiaries who will eventually calculate capital gains on property they inherit.
Under Surrogate’s Court Procedure Act (SCPA) Article 22, an executor’s accounting must be thorough and defensible. Complete tax and financial records are the best way to prepare for this final step and to demonstrate that you have fulfilled your duties with diligence.
A Practical Retention Policy for Executors
So, what is the right answer? While no single rule fits every estate, I generally advise executors to think in layers. The core documents are the tax returns themselves (Forms 1040, 706 for estate tax, etc.), gift tax returns, and any documents related to the ownership and basis of significant assets like real estate or a business.
Here is a framework we often use to guide fiduciaries:
- Keep tax returns permanently. The physical paper takes up little space, and a digital copy takes up none. There is no good reason to destroy them.
- Keep supporting documents for at least seven years. This covers the longest of the standard IRS look-back periods and provides a buffer for any state-level inquiries or beneficiary questions. This includes W-2s, 1099s, brokerage statements, and records of deductible expenses.
- Keep records related to asset basis indefinitely. Documents proving the purchase price of a home, stock, or valuable artwork should be retained and passed on to the beneficiaries who inherit those assets. This is not for your protection, but for theirs.
Your role as executor is temporary, but your actions have a generational impact. Being a deliberate and intentional custodian of the decedent’s records protects the estate, satisfies your legal obligations, and provides clarity for the family members left behind.
If you are serving as an executor and need to establish a clear policy for managing estate records, a prudent first step is to schedule a fiduciary review. In that meeting, we would assess the specific circumstances of the estate and outline a documented plan for record retention.
