Taxes & Death

Welcome to the Margins Memo! I am so glad you’re here. Each week, I’ll take a deep dive into how to navigate hidden systems that keep you from wealth, time, energy, and safety—and the blueprints to building something better.

The other evening, as I was lying on a spongy exercise mat during my stretching class, I couldn’t stop thinking about death and taxes. As one does. And yes, I’m at the stage of my life where I need to attend a class solely to stretch my muscles for an entire hour. Because when left to my own devices, I will promptly turn it into a brittle rubberband. And the weeks I don’t go to my stretching class, I definitely feel it. But, I digress.

So back to my morbid thoughts on taxes and death. About a decade ago, I found myself in the basement of my childhood home slaying a gargantus paper dragon. It was a battle that was almost as epic as the Odyssey, with no end in sight. Growing up, our 1300 square foot basement was basically a giant filing cabinet. My beloved father kept every single piece of paper since he set foot in the US in the early 1980s. The lease from our very first apartment in Texas (read: I used to have a Texan accent) from over 30 years ago. A car gas receipt from 1994 from a gas station that no longer exists. The Garfield birthday card he gave on my sixth birthday and signed his full name. 

As much as I wanted to dump all the banker boxes of papers into a giant paper shredding machine that would magically spit out elephant paper mache figurines, I knew there were important papers I needed to keep. You know, for tax purposes. And in case you get audited (cue the scary music). 

As I opened up what felt like the 109th box of dusty papers to sift through, that’s when I saw it. The 1982 tax return. 1982 was a devastating year for my family. It was the year my mother and brother died in a horrific car accident. My father almost didn’t survive. And apparently during the year while he was recovering and still grieving, he filed his taxes. And report my late mother’s income up until her date of death. And claim my late brother as a dependent while still reporting his date of death. My father was an East African Indian immigrant which meant he was frugal AF. He did not hire an accountant to do his taxes. That was not in his DNA. He sat there and painstakingly itemized his medical expenses from the car accident while completing his taxes by hand. I can tell because of his very distinguishable handwriting. He’s the reason I print in capital letters till this day. 

Five years after discovering the tax return that reduced my family’s tragedy to itemized deductions, I found myself sitting in my accountant’s office to file my father’s final tax return. That’s not a term I made up. That’s what the IRS calls it: the final return. It’s supposed to be the last time an individual income tax return is filed for a person who has passed away. Except in my case, because of an oversight made by my late father’s brokerage firm, I had to complete the final tax return twice. Meanwhile, I received a letter in the mail from the IRS stating they were unable to locate my father’s tax return from the year prior and asked me to resubmit it. So now I have to go through probate because I can’t sign a copy of my late father’s taxes without being assigned as the executor of his estate by probate court. To say that navigativing the adminstrative paperwork was painful during the months following my father’s taxes is an understatement.

And that’s what people don’t tell you when you are dealing with the death of a close family member. That even though that person is dead, they still owe the IRS taxes. And someone needs to still file their taxes on their behalf.  And it turns out there is no magical tax fairy that shows up at your front door once your loved one passes. And depending on the circumstances, you may need to go through probate. All of this takes a ridiculous amount of time and costs an even more ridiculous amount of money. 

Nobody tells you that dealing with the administrative side of death is just as painful as dealing with death itself.

So what does taxes and death have to do with multiplying your margins? Let’s get into it.

Margins in Safety for your family and you often means ensuring you put all the necessary safeguards in place to protect your family and your finances. A key part of this is having the right types of insurance in place so that when the unexpected happens, the financial risk doesn’t fall squarely on your family or you. Think of it as a safety net that so one unexpected event doesn’t derail your family’s finances.

Having your important financial paperwork, especially your taxes, organized is one of the key to build margins in time. I cannot emphasize this enough. It took me years to find a system that worked for me and I still continue to refine it. The key is the both your loved ones and you are easily able to access it. It makes it easier pull key receipts and documents during tax season. Also, having the deed to your house isn’t particularly helpful if its hiding underneath a pile of old TIME magazines in your home office. No one is going to think to look there. Not even you.

Enlisting a team of experts before tragedy strikes is one of the key ways you can multiply your energy margins. This may mean having an estate attorney and accountant you’ve already vetted to help you navigate complex legal and tax situations as they arise. That way you are not frantically trying to find an accountant during the busy tax season.

Intentional tax planning to lower your tax burden is one of the keys to multiplying your margins in money. It’s not just about earning more money but how to keep more of the money you already earn. It’s also setting up your estate intentionally so that your loved ones don’t end up crying in an accountant’s office while trying to file your final tax return.

So here's the question I have for you this week:

What is your single greatest challenge when it comes to tax planning?

Reply and let me know. I read every response, and would love hearing from you.

See you in the margins,

Miloney