Taxes Can Make You Sick

usan was an alcoholic and had been declared incompetent. By the time I met her, however, she had gone to court to have herself declared competent, which is something I’ve never heard of before or since for that matter.

Susan had stopped drinking and was now in AA. She had two trusts, one under the will of each parent. The trust under her father’s will provided only for distributions of income. The trust under her mother’s will provided for income distributions and, in addition, principal payments but only for medical reasons. There was no other reason that we could give money to Susan either directly or on her behalf.

I liked Susan very much. I thought this was a woman who had struggled all of her life and was trying very hard to pull her life together.

One day she called me and she was almost hysterical.

“What’s the matter, Susan?”

“I’m going to go to jail.”

“What do you mean you are going to go to jail, why are you going to jail?”

“The IRS is after me. I have not paid my taxes. I didn’t know I had to pay taxes.”

She didn’t know what she was going to do. She had no resources other than the trusts. She had no savings and no job.

Taxes Can Make You Sick | Page 1 | © Hartley Goldstone | Navigating The Trustscape™

“Could the trusts help me?”

She also said that she was tempted to start drinking again. She was under the care of a psychiatrist who had told her that she had to resolve her tax problem because it was making her worse.

I thought about it. Maybe we had a way to say that her failure to pay taxes was making her ill.

Maybe we could say that the payment for tax purposes was a medical expense.

“Would it be all right if I spoke to your psychiatrist?” I told her why.

“Yes, you may do that.”

I called the psychiatrist who said that the IRS threat was the only topic on Susan’s mind. Susan couldn’t get beyond it and it was interfering with her recovery, with her ability to stay sober. It was awful.

“Would you write a letter to me confirming that Susan’s tax situation is worsening her medical situation?” The psychiatrist readily agreed to do so.

On the basis of that letter and my understanding of Susan's plight, I agreed to pay her outstanding taxes and obtained the necessary approvals within the Trust Company to do so. We paid her outstanding taxes. We also set up a system to reserve a certain amount of her trust income to pay future taxes so she wouldn’t have this problem again.

This worked because I knew Susan and I thought, “Why did her mother limit the trust’s ability to pay only for medical purposes?" I concluded that she was worried that if Susan got her hands on the money she would drink it, or waste it in some way. I don’t think she wanted Susan to be sick because of her inability to pay taxes.

Giving Susan the money to pay taxes was the right decision.

Taxes Can Make You Sick | Page 2 | © Hartley Goldstone | Navigating The Trustscape™