Legal Issue: Does having a will avoid probate?

Rule: Uniform Probate Code §2-101 – A will passes through probate unless replaced by non-probate mechanisms like trusts or TODs.

In other words - probate is the "default".

The silent beneficiary is expecting a piece of the pie.

Analysis:

✅ In In re Estate of Fick, 678 S.E.2d 46 (N.C. Ct. App. 2009), the court confirmed that a will triggered full probate proceedings.

✅ In Estate of Westfall, 812 S.W.2d 903 (Mo. 1991), relying on a will caused disputes among heirs and probate litigation.

✅ In Estate of Jackson, 2020 WL 1467049 (Cal. Super. Ct. 2020), high-profile estates relying on wills resulted in prolonged court battles.

✅ In Estate of Thompson, 2013 WL 5407383 (N.Y. App. Div. 2013), the court highlighted how wills failed to transfer certain assets smoothly.

Flow Like Water Tip:

Use a layered plan with revocable trusts, TODs, and properly titled assets.

A will alone directs the court - it does not bypass it.

Avoid probate by structuring assets to transfer outside of the court system.

⚰️ Estate Tax Inclusion After Gifting

Legal Issue: If I give away assets before I die, are they still part of my taxable estate?
Rule: IRC §§2036–2042: If you retain control or benefit, the IRS includes the asset in your estate.

Analysis:

✅ In Estate of Strangi, 417 F.3d 468 (5th Cir. 2005), the IRS pulled $11 million into the estate due to retained control over a family partnership.

✅ In Estate of Powell, 148 T.C. 18 (2017), the court ruled that even indirect control over voting power triggered inclusion.

✅ In Estate of Bigelow, T.C. Memo. 2005-65, poor execution led to full estate inclusion.

✅ In Estate of Bongard, 124 T.C. 95 (2005), failure to prove legitimate business purpose made transfers look like tax shelters.

Flow Like Water Tip:

Giving up title isn’t enough - give up control too.

Use properly drafted irrevocable trusts and remove all retained powers.

Be careful with FLPs and LLCs - execution matters more than the document.

🧾 Gift Tax & Form 709 Confusion

Legal Issue: Do I need to file anything if my gift is under the annual exclusion limit?
Rule: IRC §2503(b), §2511: Certain gifts require Form 709 even under the limit, especially if incomplete or trust-based.

Analysis:

✅ In Commissioner v. Estate of Sanford, 308 U.S. 39 (1939), a trust gift was ruled incomplete and included in the estate.

✅ In Estate of Petter, T.C. Memo. 2009-280, formula clauses were scrutinized, and reporting protected the taxpayer.

✅ In Estate of Cristofani, 97 T.C. 74 (1991), improper trust structuring led to questions on exclusion eligibility.

✅ In Estate of Dieringer, 146 T.C. 117 (2016), lack of proper reporting caused valuation issues and tax adjustments.

Flow Like Water Tip:

Always file Form 709 for trust gifts, even if under $18,000–$19,000 limit.

Confirm gifts are “complete” legally - not just emotionally.

Use Crummey notices and proper language to make trust gifts IRS-proof (especially for insurance policies).

🛡️ Trusts & Asset Protection

Legal Issue: Do all trusts protect you from lawsuits and creditors?
Rule: Revocable trusts offer zero protection; offshore trusts fail if you retain control.

Analysis:

✅ In FTC v. Affordable Media, 179 F.3d 1228 (9th Cir. 1999), an offshore Cook Islands trust was pierced due to retained control.

✅ In United States v. Grant, 2013 WL 1729380 (S.D. Fla. 2013), the IRS penetrated an offshore trust.

✅ In In re Lawrence, 279 F.3d 1294 (11th Cir. 2002), a domestic judgment defeated a supposed asset protection structure.

✅ In U.S. v. Roye, 2023 WL 5600067 (C.D. Cal. 2023), a self-settled trust was deemed fraudulent and dismantled.

Flow Like Water Tip:

Irrevocable = protection; revocable = exposure.

Don’t keep control, power, or benefit if protection is the goal.

Offshore doesn’t mean invisible = substance beats form (paper structure).

❤️ No Estate Plan = Spouse Inherits Everything?

Legal Issue: Will my spouse get everything if I die without a plan?

Rule: Uniform Probate Code §2-102: Spousal rights vary based on other heirs and state law.

Analysis:

✅ In Estate of Mellinger, T.C. Memo 1999-300, lack of planning created disputes between the spouse and children.

✅ In Estate of Lee, 2009 WL 2448563 (Cal. App. Ct.), intestacy laws split assets among estranged family members.

✅ In Estate of Harrell, 2011 WL 1832762 (Tex. App.), title-based ownership conflicted with assumed spousal rights.

✅ In Estate of Cushing, 2020 WL 2486271 (Mass. Prob. Ct.), default rules led to forced property sales to distribute value.

Flow Like Water Tip:

Don't leave your spouse to the mercy of state law.

Use trusts, beneficiary designations, and joint titling to ensure clarity.

Avoid probate surprises by planning the full map - not just hoping for fairness.

🏢 Business Succession – Family Automatically Gets the Business?

Legal Issue: Does your business automatically pass to your family after death?
Rule: IRC §§2031 & 6166: Business interests are included in the estate and may be subject to estate taxes, valuation disputes, and probate delays.

Analysis:

✅ In Connelly v. United States, 70 F.4th 412 (8th Cir. 2023), the IRS included $3.5M in life insurance proceeds in the valuation of a closely held business, triggering $890,000+ in estate tax.

✅ In Estate of Blount v. Commissioner, T.C. Memo 2004-116, the IRS challenged valuation discounts, increasing estate tax liability.

✅ In Estate of Giustina v. Commissioner, 586 Fed. Appx. 417 (9th Cir. 2014), improper valuation of partnership interests led to higher estate taxes.

✅ In Estate of Gallagher v. Commissioner, T.C. Memo. 2011-148, inconsistent planning and valuation disputes cost the estate millions.

Flow Like Water Tip:

Don’t assume ownership = transfer.

Build a buy-sell agreement with fixed terms, clear funding (life insurance), and defined valuations.

Use entity planning and succession documents to avoid IRS interpretation.

🧾 Life Insurance & ILITs – Tax-Free and Out of Estate?

Legal Issue: Is life insurance excluded from the estate if owned by a trust? Is life insurance tax-free?

Rule: IRC §2042: Life insurance is included in the estate if the decedent retains any "incident of ownership" (e.g. power to change beneficiary, change terms, borrow loans, or pay premiums).

Analysis:

✅ In Estate of Gerson v. Commissioner, T.C. Memo 1987-567, the IRS included the entire policy benefit in the estate due to retained control.

✅ In Estate of Skifter v. Commissioner, 468 F.2d 699 (2d Cir. 1972), failure to relinquish powers caused inclusion.

✅ In Estate of Ledford v. Commissioner, T.C. Memo 1983-431, the grantor’s continued premium payments invalidated the ILIT.

✅ In Estate of Robinson v. Commissioner, T.C. Memo 2010-100, DIY execution led to full estate inclusion despite the use of a trust.

Flow Like Water Tip:

Fund ILITs with gifted premiums - not personal checks.

Avoid retained powers (no control, no amendment rights).

File Form 709 annually for premium gifts and ensure proper trustee administration

🪙 Cryptocurrency – Private, Untaxed, and Invisible?

Legal Issue: Is cryptocurrency untaxed and anonymous by default?

Rule: IRS Notice 2014-21 + IRC §6038D: Crypto is treated as property; gains are taxable and must be disclosed, including foreign holdings.

Analysis:

✅ In United States v. Coinbase, Inc., No. 17-cv-01431-JSC, 2017 WL 5890052 (N.D. Cal. Nov. 28, 2017), the court compelled Coinbase to hand over data on 14,355 users.

✅ In U.S. v. Gratkowski, 964 F.3d 307 (5th Cir. 2020), the court ruled that crypto transaction data is not protected by privacy rights.

✅ In IRS v. Kraken (2023 settlement), the IRS obtained thousands of customer identities and transaction records.

✅ In U.S. v. Doe, IRS audits identified unreported gains of $400,000+, showing that hidden wallets can still be traced through blockchain analytics.

Flow Like Water Tip:

Crypto = property. Report it, track basis, and document transfers.

Include crypto in your estate plan - consider gifting and donation strategies.

Lost keys = lost assets and taxable event (even without access).

Use smart contracts, custodial keys, and cold wallets with legal alignment.

Change the title of your crypto accounts to match the trusts or foundation.