GPSolo September 2007
Celebrating Life (Chai) and Taxes
If you ask my law students, “What does Professor Lipman do?” they would respond, without missing a word of their concurrent cell phone conversation, “she teaches tax.” I have been doing the same thing for more years than I care to admit. I study tax law. The only difference between my side of the podium and my students’ is that I have spent and will spend more time at the task.
The time to organize and arrange one's affairs is when one is celebrating life and not battling death.
Ironically, the deeper I dig into tax law, the darker and more disconcerting becomes the abyss of unanswered questions. More recently, even my simplest utterances sound like they end with a question mark. The ineluctability of aging and its concomitant badge of wisdom are riddled with uncertainty and pause for what cannot be undone and what will never be done. This fall, I returned again to the classroom having learned the hard way that there is nothing certain about taxes or death.
Since completing my first tax class, I have been the family tax goddess. Through the years, I have necessarily gotten more and more involved with my parents’ and grandmother’s financial estate planning and now handle their routine transactions.
In May 2003, my mother was diagnosed with colon cancer. Having seen my mother fight and survive thyroid and breast cancer, we prepared her with the physical and emotional support to fight the terrifying battle against cancer again. The surgery was a success and her 15 lymph nodes were clear. My mother healed quickly and went back to her exercise class as an official member of the semi-colon club.
Months passed and then a follow-up CAT scan depicted a small tumor in her liver. I will never forget the look on my mother’s face when the oncologist told her the cancer had metastasized and that she would not win this battle. He told her that the only thing that he could do was extend her limited life span with chemotherapy. He asked her to go home and think about what she wanted to do and to call him when she had made her decision. Somehow we walked out of this nightmare into the waiting room full of cancer patients, and we sat and hugged and cried rivers of tears. For my mother there was no decision to make, for more than 70 years she had embraced life and she would not, could not, stop now.
She fought her cancer like she lived her life—with courage, determination, and passion. After 30 months of chemotherapy, she became a favorite patient and loved friend of the heroic oncology nurses. She even caused her oncologist to thaw and smile on occasion. Like the sign I posted on her refrigerator . . . she never, never, never gave up.
My mother did not survive my father and grandmother. As we prepared for her funeral, I realized that despite a very hands-on, logical, and up-to-date approach to my family’s financial and estate planning, I had made some misjudgments. Because neither death nor taxes are certain, I simply could not predict the future. For example, I had assumed my mother would outlive my father, so we elected to have him waive his right to a survivors’ benefit. This increased my mother’s monthly pension amount while she was alive. We also named my mother rather than my father as the custodial of their granddaughters’ educational IRAs. As typical of their generation, my father, rather than my mother, had whole life insurance policies. Rational decisions when made, but in hindsight not the best choices financially.
As I spent the summer settling my mother’s rather simple and straightforward estate and rethinking and adjusting my father’s and grandmother’s estate plans, I learned several real-world lessons. Even under the best of circumstances, settling the affairs of a decedent is an incredibly time-consuming, detail-oriented, complicated, and emotionally exhausting process. Moreover, with my loss of confidence in the certainty of death and taxes, I realized that myriad new issues had been presented.
My grandmother will be 100 in December. Her doctor reports that she has the body of a 70-year-old and could very well live another five to ten years. Accordingly, providing for her nursing home care for the next decade versus living at home has become a central issue. I am now studying long-term care insurance, irrevocable funeral trusts, and MediCal.
As a CPA/attorney/tax professor, I clearly have an advantage regarding researching and understanding the many legal and tax issues presented for financial and estate planning. However, for the typical family, there are many critical details to accumulate, sort, and understand. These matters should not be put off until someone is diagnosed with a terminal disease. During the battle for life, focus should not be on death or taxes. The time to organize and arrange one’s affairs is when one is celebrating life and not battling death.
Complete and up-to-date records. Because I had taken over my parents’ and grandmother’s financial planning years ago, I had a very good understanding about the details of their various financial accounts, including the location of their safe deposit box and the access key. We also had a current list of everything that was in the safe deposit box, and I generally knew where all the important papers were located. I discovered that although my parents had copies of their birth certificates, they did not have a copy of their marriage certificate or the pink slip to their car.
Copies of historic income and other receipts for major appliances, details of life, property and health insurance coverage, vehicle registration and smog information, promissory notes, mortgages, lines of credit, and credit card liabilities are critical information. A list of monthly expenses or copies of bills with addresses and telephone numbers might ensure that services that should be canceled quickly to avoid unnecessary expenses can be handled readily. The same detailed records should be kept for income items so that these benefits can be continued or canceled, as the case may be, and the survivor does not end up owing money that has already been spent or suffering onerous penalties for mishandling. Copies of credit reports can help with these types of inquiries.
Detailed records of tangible personal property are rarely maintained. Writing down the story behind a loved one’s treasures should be done so that the intimate memories and stories can continue to be recounted for generations. These details can also help ascertain values if necessary. This advice applies even to personal property that has only sentimental value. Write down the stories, as well as who should receive the treasure in the far-off future, to preserve the family memories for eternity.
Durable powers of attorney and advance health care directives. Once my mom was diagnosed with terminal cancer, she resisted answering some of the very tough questions on her advance health care directive. This made it difficult to admit her to the hospital because only she could sign herself in and she was not in any shape to do that. It is easier to deal with these tough questions when one is not facing the painful reality of their pending application. Given the strict privacy requirements for most personal information, it is difficult to handle any health or financial matter over the telephone or otherwise without the person being available to authorize the conversation or having an appropriate power of attorney on record. By the time you realize you need these documents, it is usually very challenging and costly to get them prepared, notarized, and delivered in a timely manner.
Francine Lipman is a law professor at Chapman University School of Law in Orange, California.
For more information about the Section of Taxation
This article is an abridged and edited version of one that originally appeared on page 26 of ABA Section of Taxation NewsQuarterly, Fall 2006 (1:13). For more information or to obtain a copy of the periodical in which the full article appears, please call the ABA Service Center at 800/285-2221.
Periodicals: NewsQuarterly, quarterly newsletter; The Tax Lawyer, quarterly journal; The Practical Tax Lawyer (published by ALI-ABA in cooperation with the Section), subscription available to Section members at a significant discount; The State and Local Tax Lawyer, annual journal.
Books and Other Recent Publications: Effectively Representing Your Client Before the “New” IRS: A Practical Manual for the Tax Practitioner with Sample Correspondence and Forms; Sales and Use Tax Deskbook; The State and Local Tax Lawyer; Property Tax Deskbook; A Comprehensive Analysis of Current Consumption Tax Proposals; State and Local Taxation of Banks and Other Financial Institutions; Value Added Tax: A Model Statute and Commentary.