The basic answer to this question is that it enables people to feel assured that after they have passed, the fruits of their lifetime of labor will go to the parties they designate. Failure to create a will or trust will result in the distribution of one's assets based on the local jurisdiction's law of intestate succession. Unfortunately this is totally out of the control of the testator or grantor, ergo the will/trust to add a control factor to the disposition of one's assets from the grave.
Unfortunately many people who draft dispositive instruments are not true craftsmen. The result of what has been drafted often creates chaos and leads to estate litigation involving heirs or beneficiaries who believe that they were entitled to a larger "piece of the pie" or some specific asset which the decedent owned that they felt they were entitled to.
One broad classification of asset creates this problem if the drafter fails to add sufficient specificity to dispositive provisions. The area of concern relates to the distinction of tangible personalty versus intangible personalty. Occasionally we have seen situations where the failure to make this distinction leads to prolonged and very expensive litigation.
Tangible personalty is something that you can touch or hold, something with intrinsic value like a car, a watch, a diamond ring, or a fur coat. Intangible personalty is something that represents the value but cannot be held or touched, something with no intrinsic value like a stock brokerage account, the balance in a bank account, an IOU etc.
One area in which this distinction has caused problems is gold. Gold can be found in a number of different forms, and the exact form may dictate disparate results. Let's say that the testator leaves his personalty to his wife and his intangibles to his children. What happens when he has gold in several forms, bars and bouillon clearly being tangibles but what of gold certificates? Cases have been litigated over this type of distinction where testators/grantors failed to sufficiently fine-tune the distinctions between the forms of things like gold.
Additionally, this type of situation, how and where gold is kept can cause problems with the IRS in a format relating to the FBAR. The issue emerges as, "what is a financial account"? We find that in the law, based on a number of instances, great specificity is required to prevent potential subsequent problems amongst heirs or with the Internal Revenue Service.
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Robert S. Blumenfeld - Estate Tax Audit Counsel
Mr. Blumenfeld concentrates his practice in the areas of International Tax and Estate Planning, Probate Law, and Representation of Resident and Non-Resident Aliens before the IRS.
Prior to joining Marini & Associates, P.A., he spent 32 years as the Senior Attorney with the Internal Revenue Service (IRS), Office of Deputy Commissioner, International.
While with the IRS, he examined approximately 2,000 Estate Tax Returns and litigated various international and tax issues associated with these returns.As a result of his experience, he has extensive knowledge of the issues associated with and the preparation of U.S. Estate Tax Returns for Resident and Non-Resident Aliens, Gift Tax Returns, Form 706QDT and Qualified Domestic Trusts.
Robert S. Blumenfeld, Esq.