Utah Estate Planning Basics

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WHAT IS AN ESTATE?

An estate is comprised of the assets and liabilities left by a person at death.¹Merriam-Webster, Estate. in Merriam-Webster.com Dictionary, https://www.merriam-webster.com/dictionary/estate (last visited Oct. 13, 2022). An estate includes all of one’s things, such as property, money, and even debts.

There are a few things a person can do to make sure that the estate they leave behind is given to the people of their choosing and guarantee that their loved ones will not have to guess as to what the decedent wanted.

A basic estate plan consists of the following documents:²Rust Tippett, Basic Utah Estate Planning Information, http://www.utahestateplanning.org/public/BasicEstatePlanning.aspx#WhatDoesBasicEstatePlanLookLike (last visited Oct. 13, 2022).

1. A revocable trust (or irrevocable trust);
2. a will;
3. a power of attorney; and
4. an advance health care directive.

WHAT IS A TRUST?

A trust is a legal arrangement in which a person or organization controls property and/or money for another person or organization.³Cambridge Dictionary, Trust, https://dictionary.cambridge.org/us/dictionary/english/trust (last visited Oct. 13, 2022).

WHAT IS A REVOCABLE TRUST?

A revocable trust, also known as a living trust, is a trust that one creates during their lifetime. A revocable trust helps one manage their assets or protect them if they become ill, disabled, or too challenged by the symptoms of aging.⁴American Bar Association, Revocable Trusts, https://www.americanbar.org/groups/real_property_trust_estate/resources/estate_planning/revocable_trusts/ (last visited Oct. 13, 2022). The majority of revocable trusts can be revoked or amended by a person if they wish to do so later.

It is important to note that revocable trusts are not estate-tax-exempt because a person is able to revoke or amend them. These trusts also do not help a person avoid probate.⁵See id.

Having a revocable trust allows a person to be the initial trustee and have full access to their trust. One can sell trust property, transfer more properties to their trust, or add or remove beneficiaries to the trust. If a person is the initial trustee of a revocable trust, they will also name an additional trustee that will be able to act as the trustee if the person is unable to.

Per Utah Code § 75-7-604, the capacity required to create, amend, revoke, or add property to a revocable trust, or to direct the actions of the trustee of a revocable trust, is the same as that required to make a will.

HOW DOES SOMEONE AMEND OR REVOKE A REVOCABLE TRUST?

Utah Code § 75-7-605 states that the settlor may revoke or amend a revocable trust:

1. By substantially complying with a method provided in the terms of the trust; or
2. If the terms of the trust do not provide a method or the method provided in the terms is not expressly made exclusive, by:
   1. Executing a later will or codicil that expressly refers to the trust or specifically devises property that would otherwise have passed according to the terms of the trust; or
   2. Any other method manifesting clear and convincing evidence of the settlor’s intent.

WHAT IS AN IRREVOCABLE TRUST

An irrevocable trust cannot change or end after its creation.⁶Wex Definitions Team, Irrevocable Trust, https://www.law.cornell.edu/wex/irrevocable_trust#:~:text=Irrevocable%20trust%20refers%20to%20any,to%20shield%20assets%20from%20creditors (last updated Mar. 2022). However, an irrevocable trust can potentially avoid estate taxes that would otherwise apply.⁷See id. If assets are in an irrevocable trust, then creditors cannot take the assets out of the trust in the event of a lawsuit. If a person wants to limit estate taxes or shield assets from creditors,⁸See id. then an irrevocable trust is a good option.

Utah Code § 75-7-605 states that unless the terms of a trust expressly provide that the trust is irrevocable, the settlor may revoke or amend the trust.

DIFFERENCES BETWEEN REVOCABLE AND IRREVOCABLE TRUSTS

Different reasons someone might want an irrevocable trust include:

• they want to protect their assets from future creditors;
• they do not want to control their own assets once the trust is established;
• the value of their assets is much higher than the federal tax exemption; and/or
• they worry about future litigation.

Different reasons someone might want a revocable trust include:

• they want to have the ability to make changes to the trust as it becomes necessary;
• they want full control of their assets after the trust is established;
• the value of their assets is less than the federal estate tax exemption; and/or
• they have every asset they own designated to whom they want it to go.

WHAT IS A WILL?

A will is a document that gives instructions for managing a testator’s (the person whose will it belongs to) estate. To be valid, a will must be in writing, signed, and attested (witnessed).⁹Wex Definitions Team, Will, https://www.law.cornell.edu/wex/will (last updated Aug. 2022).

A will must be:

• in writing;
• signed by the testator or in the testator’s name by some other individual in the testator’s conscious presence and by the testator’s direction; and
• signed by at least two individuals, each of whom signed within a reasonable time after he witnessed either the signing of the will or the testator’s acknowledgment of that signature or acknowledgment of the will.¹⁰Utah Code § 75-2-502.

There are a few instances where if a will has not been executed, it can still be used as a will.

Under Utah Code § 75-2-503, a document or writing can be treated as a will if the proponent of the document or writing establishes by clear and convincing evidence that the decedent intended the document or writing to constitute,

1. the decedent’s will;
2. a partial or complete revocation of the will;
3. an addition to or an alteration of the will; or
4. a partial or complete revival of his formerly revoked will or of a formerly revoked portion of the will.

WHAT ARE SOME THINGS TO INCLUDE IN A WILL?

• Basic Personal Information: One’s address, name, date of birth, and even phone number, among others.
• Declaration of Intention. A will should also include legal language that declares that one intends that the drafted document be construed as a will.
• Appointment of Executor/Guardian. One should also include one’s appointed executor and appointed guardian for any pets or minor children. An appointed executor is someone the testator wants to take care of the testator’s finances and belongings. An appointed guardian is someone who the testator wants to care for the testator’s child(ren) and/or pet(s).
• List of Properties. A testator can also include a list of their property and who they want it transferred to if something happens to them.
• Funerary Instruction. A testator can also include any specific desires for their funeral; the testator needs to inform their friends and family as to what the testator wants. This is because sometimes a will is not read until after the funeral.

A will is different from a living will (see below).

WHAT IS A POWER OF ATTORNEY?

A power of attorney is a legal document in which a person (a principal) gives to another person (agent or authorized agent) authority to act on behalf of the principal. An example of this would be having an agent make bank deposits and withdrawals from a principal’s account or have an agent sell a specific piece of real property (house, car, television, etc.) for the principal. The agent in a power of attorney can also help with financial affairs.

The agent has the responsibility (called a “fiduciary duty”) to act in the highest regard toward the principal and cannot use the assets of the principal in a way that is against the principal’s wishes.

A power of attorney is an important document that allows an agent to handle a principal’s financial matters without the need for more complex arrangements like a trust, court-appointed guardian, or conservator. Additionally, a power of attorney can help protect a principal against possible financial exploitation and abuse.

A power of attorney agent can apply for disability benefits on behalf of the principal if the principal is not able to. An agent can file insurance claims, appeal insurance denials, and even contract health care services, such as an in-home nurse, Meals on Wheels, assisted living, or hospice. An agent can pay a principal’s bills and help make sure that things do not go into default while the principal is incapacitated. Without a power of attorney, a person’s family may have to ask the court to appoint a guardian for that person. Appointing a guardian takes time and is expensive, and it also puts unnecessary hardship on the person’s family because they might not know what the person would have wanted.

A family member’s illness or death is a difficult time for any family, and having important documents prepared for exactly this time can be vital.

WHAT IS A LIVING WILL (HEALTH CARE DIRECTIVE)?

A living will, also known as a healthcare directive, is a written statement detailing a person’s desires regarding their medical treatment in circumstances in which they are no longer able to express informed consent, especially an advance directive.¹¹Mayo Clinic Staff, Living Wills and Advance Directives for Medical Decisions (Aug. 2, 2022), https://www.mayoclinic.org/healthy-lifestyle/consumer-health/in-depth/living-wills/art-20046303.

A living will gives guidance to a person’s doctors and health care executives.

It is not uncommon for a person to be unconscious, in distress, or otherwise not able to speak when they are at the end stages of life. A living will ensure that their last wishes are followed, and that their healthcare is managed as they want.

WHAT IS PROBATE?

Probate is the formal legal process that gives recognition to a will and appoints the executor or personal representative who will administer the estate and distribute assets to the intended beneficiaries.¹²American Bar Association, The Probate Process, https://www.americanbar.org/groups/real_property_trust_estate/resources/estate_planning/the_probate_process/ (last visited Oct. 13, 2022).

Probate is a court-supervised process of administering an estate and transferring the decedent’s property at death pursuant to the terms of the decedent’s will.

Probate has become an easier process in Utah. If no dispute arises, it is possible for the estate to be probated without there ever being a hearing with a judge.¹³Rust Tippett, Basic Utah Estate Planning Information, http://www.utahestateplanning.org/public/BasicEstatePlanning.aspx#WhatIsProbate (last visited Oct. 13, 2022).

If a person has property in a revocable trust when they die, that property will avoid probate. Additionally, property held in joint tenancy, or property that has a valid beneficiary designation, escapes probate.¹⁴See id.

WHAT IF A PERSON DIES WITHOUT AN ESTATE PLAN?

If a person dies without an estate plan, things can get a little complicated, but it happens a lot of the time. Such a circumstance is referred to as “intestate,” which refers to the state of dying without a will.¹⁵Legal Information Institute, Intestacy, https://www.law.cornell.edu/wex/intestacy (last visited Oct. 13, 2022).

One of the first things to look at when a person has died intestate is if they have property that was held in a joint tenancy or had a valid beneficiary designation attached to it.

At death, property held in joint tenancy automatically passes to the surviving joint tenant.¹⁶Rust Tippett, Basic Utah Estate Planning Information, http://www.utahestateplanning.org/public/BasicEstatePlanning.aspx#WhatIfIDie (last visited Oct. 13, 2022).

Any part of a decedent’s estate not effectively disposed of by a will passes by intestate succession to the decedent’s heirs, except as modified by the decedent’s will.

The second thing to look at is if the decedent was married or had descendants (children, grandchildren, etc.). If the decedent had descendants, but their spouse is living, then all the decedent’s property passes to their surviving spouse.¹⁷See id. However, if the decedent was married, but the descendants are not the surviving spouse’s descendants, the surviving spouse receives $75,000.00 off the top, plus one-half of the balance of the deceased person’s property. The balance of the decedent’s property then passes to their descendants.¹⁸Utah Code § 75-2-102.

Per Utah Code § 75-2-103, if there are no descendants and the estate is not passed to a spouse, or if there is no spouse, the estate goes to the parents of the deceased. If there are no surviving parents of the deceased, but there are surviving descendants of the parents, then the estate goes to them. If there are no surviving descendants, parents, or descendants of parents, but there are surviving grandparents, then the estate goes to them.

Things can get a little more complicated if there are multiple descendants, but the majority of the estate will be split completely evenly among each descendant, whether that be a child, parent, sibling, or grandparent. This is, of course, only if there is no will that expresses the wishes of the deceased.

In Utah, if a person dies owning less than $100,000.00, and if none of the property the person owns is real estate, no probate of the person’s estate will be needed.¹⁹Tippett, supra.

It is important for people with children to nominate a guardian for their child(ren) in the event the person dies while the children are still minors. This way, the decedent’s family will not have to do any guessing.

BASIC ESTATE PACKAGE

In general, it is a good idea for everyone to have a basic estate package. This includes,

1. a revocable trust (or irrevocable trust depending on the person and their assets);
2. a will;
3. a power of attorney; and
4. a health care directive.