How Long to Keep EOBs After Death?

An Explanation of Benefits (EOB) is a document from a health insurance company detailing medical services received, their cost, the amount paid by the insurer, and the patient’s responsibility. It is not a bill, but a summary of how a medical claim was processed. Understanding EOBs is important when managing a deceased individual’s affairs, helping determine which documents to retain and for how long.

Understanding EOBs in Estate Management

An Explanation of Benefits details medical treatments or services paid by a health insurer. It typically includes the date of service, a description of the service, the provider’s name, the total fee, the amount the insurer allowed, and any remaining balance the patient owes. For the administrator or executor of a deceased person’s estate, EOBs are valuable tools. They assist in verifying final medical bills, reconciling insurance claims, and identifying any potential outstanding debts or reimbursements that may be due to or from the estate.

EOBs are also instrumental in supporting tax deductions. For instance, they can substantiate medical expense deductions on the deceased’s final income tax return, Form 1040, or potentially an estate tax return, Form 706, if applicable. The records help ensure that all financial obligations are accurately accounted for and that the estate benefits from any available tax advantages related to medical costs.

Standard EOB Retention Practices

For living individuals, general recommendations suggest keeping EOBs for varying periods, depending on their purpose. Many financial professionals advise retaining medical expense records, including EOBs, for at least one year to confirm payments and track deductibles against insurance statements. If medical expenses are used for tax deductions, these documents should be kept for a longer duration, typically three years from the tax filing date, aligning with general IRS audit guidelines.

These guidelines primarily serve as a baseline for active individuals managing their ongoing healthcare and financial records. However, the requirements for retaining EOBs change significantly when managing a deceased person’s estate, necessitating a different approach to ensure all legal and financial responsibilities are met.

Post-Death EOB Retention Guidelines

When a person passes away, the retention period for their EOBs extends beyond typical individual practices due to the complexities of estate settlement and potential tax obligations. EOBs should be retained until the estate is fully settled, which involves paying all outstanding bills, resolving claims, and distributing assets. The probate process, which is the legal procedure for settling an estate, can vary widely in duration, from as little as six months for simple estates to several years for more complex situations involving disputes or significant assets. Therefore, keeping EOBs throughout the entire probate period is a practical necessity.

For tax purposes, EOBs are important for the deceased’s final income tax return (Form 1040) and, if the estate is large enough to be subject to federal estate tax, for the estate tax return (Form 706). The Internal Revenue Service generally recommends keeping tax records for three years from the date the original return was filed. However, this period can extend to six or seven years in cases where there is a substantial understatement of income or a claim for a loss from worthless securities or bad debt. Medical expenses paid by the estate within one year of the date of death can be included as deductions on the deceased’s final income tax return, making EOBs essential for substantiation.

Additionally, EOBs should be kept for a period that accounts for potential claims or disputes. Medical debt collection is subject to a statute of limitations, which is a legal timeframe within which creditors can initiate a lawsuit to collect a debt. This period varies significantly by state, generally ranging from three to ten years. Retaining EOBs for this duration helps the estate respond to any late-arriving bills or challenge billing errors effectively.

Organizing and Disposing of EOBs

Effective organization of EOBs is important while they are being retained. Whether maintaining physical or digital copies, a systematic approach, such as organizing documents chronologically or by medical provider, can ensure easy access when needed for estate administration, tax filings, or dispute resolution. For physical documents, secure filing cabinets can be utilized, while digital files should be stored on secure, backed-up systems. This organized approach can simplify the process of reviewing medical expenses and corresponding insurance payments.

Once the applicable retention periods have passed, securely disposing of EOBs is important to protect sensitive personal and medical information. Shredding physical documents is a recommended method to prevent identity theft and maintain privacy. For electronic EOBs, secure deletion protocols should be followed. While the EOBs themselves may no longer be needed, any summaries of medical expenses used for tax purposes or other financial records derived from these EOBs might warrant longer retention. However, the EOB document itself, containing detailed protected health information, should be properly destroyed once its utility and legal retention requirements have expired.