Why Everyone Should Prepare a Letter of Final Instruction

Julian Block discusses the importance of having a letter of instruction, some presidential opinions on income taxes, and much more.

Jan 30th 2020
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Tax tidbits
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When I chat with clients about revised tax rules, I’m careful not to tell them more than they would ever want to know. Instead, I focus on what’s important to them.

To enliven those conversations, I sprinkle them with what I call “tax tidbits.” Some discuss amusing and relevant court decisions, while others alert clients to perfectly legal, easy-to-understand strategies that trim their taxes.

The shorter ones usually take under 30 seconds to tell, and I use them for brief chats. I save the meatier ones for lengthier conversations and talks with groups like retirees, home owners, self-employed persons and investors.

My creditors beam when I tell them that some audience members will decide that it would be prudent to seek my advice before they implement one or more of those strategies.

Intrigued? Want to try what I do when you schmooze or give talks? What follows are representative tidbits that were well-received, a continuation of eighteen articles on the same subject.

I’d like to share more of my favorites with you here.

Presidents Lincoln and Jackson on income taxes: In an 1864 address to the 164th Ohio Regiment, Mr. Lincoln said “I apologize for the inequities in the practical applications of the tax, but if we should wait before collecting a tax to adjust the taxes upon each man in exact proportion with every other, we shall never collect any tax at all.”

Income taxes were introduced during the Civil War. Long before that Andrew Jackson took a resigned view of all taxes. “The wisdom of man never yet contrived a system of taxation that operates with perfect equality.”     

Question. What’s the position of the IRS on whether adoptive parents are entitled to medical-expense deductions for expenditures incurred by the natural mother in giving birth?

Answer. Its long-standing position is that write-offs for medical expenses are allowable only for medical costs attributable to care of the child, not those incurred to protect the health of the mother.

Why everyone should prepare a letter of final instructions. In the best of all worlds, we would know exactly what to do when someone close dies. Our loved one would have informed us where to find instructions setting forth funeral arrangements, the location of the will and any life-insurance policies, a list of all property and assets and the name of the deceased’s lawyer. Any minors would be provided for in the will. No one would challenge the authority of the executor—the person named by the deceased to make sure the terms of the will are met. Probating an estate, an often grueling court process, would be completed smoothly and quickly. In the real world, such a well-ordered process almost never occurs.—Money, August, 1986

Dining with or entertaining business associates. Wining and dining just to generate good will is not deductible. For the outlay to be allowable, substantial business must be discussed before, during or after the dining or entertaining. However, IRS regulations make an important exception when you’re the host to business guests from out of town: The exception allows you to deduct entertaining that takes place the day before or after the business discussion.

Look for more tidbits in subsequent columns.

Additional articles. A reminder for accountants who would welcome advice on how to alert clients to tactics that trim taxes for this year and even give a head start for next year: Delve into the archive of my articles (more than 300 and counting). 

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