Should I get a Will or a Trust in Utah?

Deciding between a Last Will and Testament and a Living Trust in Utah can be daunting. Wills fill many roles in an estate plan, but a Trust is either: 1) a nice supplement to a Will; or 2) a critical piece of the estate plan. How can you tell which role a Trust will fill in your estate plan? Based on your age, stage of life, risk factors for disease, and business interests, you can decide what you need.

Age and Probate Avoidance

Probate is the court-supervised process of transferring assets of a deceased person. One of the key differences between a Will and a Utah Trust is the potential to avoid the probate process through a Trust. While a Will governs the distribution of assets, it does not exempt assets administered under its authority from the probate process. However, a Utah Living Trust will fully govern and administer any assets held under its name, exempting Trust assets from probate.
Due to this probate-avoidance quality of a Living Trust, many aging Utahns elect to have a Trust. For anyone with a terminal illness or expecting to pass away within a short period due to age, a Trust is a crucial element of any Utah estate plan. However, for younger Utahns, a Trust may only be an added upgrade to an estate plan as far as probate avoidance is concerned.

Providing for Minor Children

Most estate plans for parents and grandparents provide in some ways for minor beneficiaries. Sometimes, the funds left to minors come from investments and assets, and other times the funds come from life insurance proceeds. Whenever these proceeds are left directly to a minor child, that child's legal guardian - whoever that may be - is the steward of those funds and will manage them until the child is an adult.
Through a Will, any asset can be transferred to a minor child with ease, whether to that child directly, to a custodian, or through a Trust created at the time of the administration of the Will. However, any option placing conditions of receipt of those assets until a time greater than age 21 would be through a Trust. That Trust can be created as part of the administration process of the Will, or as part of a Living Trust. The administration of the Will is tied to the probate process, so planning for minor children through a Living Trust is far more efficient and is not contingent on court delays and filings.
If any funds left for minors will not be needed for several months following the death of a parent, then a Living Trust is merely a convenience in administration. However, if those proceeds will be needed for a child's support within weeks after the death of a parent, then a Living Trust is likely a far better option for providing for minors.

Planning for Incapacity

A Last Will and Testament is of no effect until the person signing it (Testator/Testatrix) is deceased. However, a Utah Living Trust is effective immediately upon signing and from that point governs any assets owned by the Trust.
In situations where someone loses capacity to manage their own financial affairs due to stroke, Alzheimer's, dementia, or any other ailment, a Will is not effective. Family members must then go to court to obtain a costly conservatorship to manage the finances of their loved one. While a power of attorney can sometimes mitigate the need for a conservatorship, many financial institutions and title companies will not accept a power of attorney after a certain period of time has passed, even though they are required by law to do so.
A Trust immediately manages the assets held by it, so anyone occupying the office of Trustee can manage those assets. During the lifetime of the grantor of the Trust, that is usually the grantor. However, if the grantor becomes disabled or resigns, the new Trustee can manage the Trust without the need for court supervision.
A Trust then is a key element of an estate plan for anyone with risk factors for losing capacity to manage their own finances.

Closely-Held Business Interests

Finally, one more component in the decision between a Will and a Utah Living Trust is whether or not the grantor has a closely-held business interest. Most likely, this takes the form of a business owned by the grantor and a few other people at most. These small businesses often rely on the relationships and skills of the owner, rather than a smooth-running independent operation.
If your business is such that it would not be viable without your involvement after 6 months, then probate is not an acceptable option if you were to pass away. Through internal documents and a Utah Living Trust plan, we are able to ensure your loved ones can sell or manage your business affairs immediately following death or accident, instead of picking up the pieces months later when there is little left to manage.
For most small business owners, a Utah Living Trust is a key component in their estate plan, as a Will alone would not do the job.

Conclusion

If you still have questions about whether or not your estate plan includes a Utah Living Trust, feel free to schedule a free phone consultation here online or give us a call at (801) 896-4377.
Republished with permission from the Middle Class Estate Plans Blog

What If I Die Without A Will In Utah? (Part 4-What is a Child?)

house-918602_1280Everybody knows that children inherit from their parents. However, who is a child in the eyes of the law? The law's definition of "child" has changed over the years, and continues to change. If your child is not considered such by law, they will not inherit anything if you die without a Will in Utah. 

Historically, children of married parents could inherit from their parents, and the parents from the children. Children born out of wedlock could not inherit from their parents, neither their parents from them. As time passed, legislatures realized that this system often punished children born into a situation that they could not control, so the laws changed accordingly. Today, parentage is further complicated through lower marriage rates, adoption, surrogacy, fertility treatments, and terminations of parental rights. As the family makeup changes according to culture and technology, so does the law’s definition of parentage.

A complete discussion of all of the nuances of parentage laws in Utah would be too lengthy for this blog post, but more detailed information can be found in the Utah code and in family law publications. To summarize, Utah’s Uniform Parentage Act outlines the different ways that a parent can be considered a legal parent in the state of Utah and therefore a parent for inheritance purposes. For women, these include:

having given birth to the child (excepting gestational agreements);

a court decision declaring her the parent;

an adoption; or

a court decision confirming her as a parent as part of a valid gestational agreement.

For men, paternity is generally presumed if a child is born to his wife during his marriage or if the birth occurred within 300 days (10 months) of the termination of the marriage. If paternity cannot be presumed, it can be established by:

a declaration of paternity;

a court decision declaring him the parent;

an adoption;

consent to assisted reproduction; or

a court decision confirming him as a parent as part of a valid gestational agreement.

There are two exceptions to inheritance after establishing parentage. The first exception states that an adopted child is not considered the child of its biological parents for inheritance purposes. This is because the child has its adoptive parents. This rule does not apply in cases where a stepparent becomes an adoptive parent, and the stepparent is married to a biological parent, in which case the spouse would remain a parent for adoption purposes.

Example: Jim and Jane are married. Jane has a son, Arthur, from a previous marriage to Chuck. Jim adopts Arthur. For inheritance purposes, Jim and Jane are now Arthur’s parents. Chuck has no inheritance relationship to Arthur.

The second exception is a one-way exception, only affecting the right of a child’s family to inherit from the child, and not affecting the child’s right to inherit from the family. This exception prohibits a child’s family from inheriting from a child if the child’s family has refused to support the child or has not treated the child as a natural parent would.

Example: Jane is a single mother. Her partner, Chuck, is the father of her son, Arthur. Chuck abandoned Jane and Arthur and refuses to support Arthur in any way. If Chuck dies, Arthur can inherit from him if he can establish Chuck’s paternity. However, Chuck cannot inherit from Arthur if Arthur dies, because Chuck refused to support him and did not treat him as a natural parent would.

If you or a loved one do not like the way the law treats your family's composition, you can always modify the law's default rules with a Will or Trust. Contact an estate planning attorney if you want to make sure your wishes are carried out. 

Join us next time for information about Wills and how they can affect your estate plan.

 

 

Adapted from Chapter 2 of Mr. Melling's book: The Utah Uniform Probate Code: A Quick-Reference Guide for Practitioners and Students


What If I Die Without A Will In Utah? (Part 3-Inheritance If No Living Spouse Exists)

2016-01-27-elena-hruleva-barnimages-001In part 3 of our series on dying without a Will in Utah, we will discuss what happens to property after a person's death if that person is single, divorced, or widowed. If the wishes of yourself or someone you love will be affected adversely by the probate rules described in this article, it is crucial that you put a Will or Trust in place to modify the probate process to align with your wishes.

These rules especially affect inheritance in two situations: 1) When an unmarried person dies without children, some of their siblings predeceased them, and those siblings had children, and 2) when a widowed grandparent dies, some of that grandparent's children predeceased them, and those children have living children

All of the property of the deceased that does not pass to a surviving spouse passes to other "classes" of people. The estate passes equally to all members of the first "class" available. The classes are considered in the following order according to relationship to the decedent:

1. Descendants per capita (defined below)
2. Parents
3. Siblings per capita
4. 50% to paternal grandparents per capita, 50% to maternal grandparents per capita
5. Descendants of any deceased spouse per capita

“Per capita” is a method of determining how to divide an estate. It allows for surviving children of a deceased class member to inherit a portion of what their parent would inherit, as illustrated below:

1

Here, the Decedent had three children with one surviving. If only the Decedent’s children could inherit, then Bob would receive everything, leaving Alice’s children nothing from their grandparent. The Per Capita system counts how many people in a class are surviving, plus how many deceased people from that class have surviving children. In this case, the class is Decedent’s children. We count Bob because he is alive, plus Decedent’s deceased children with surviving descendants (Alice). This means that the amount that the class will receive will be divided into two parts, equally divided between Bob and Alice. Since Alice is deceased, her descendants will receive her half equally.

To make things a little more complicated, imagine if Edith was dead but left two surviving children. In that case, Edith’s children would each receive half of Edith’s share that she would have received through her mother, Alice, or 12.5% of the total estate.

Now, let’s illustrate what would have happened if Charles had surviving children:

2

Here, the chart shows that Charles left one child alive, and the result drastically changes how everybody’s shares are allocated. Instead of dividing the estate into two large parts, it is divided into three large parts, since Bob is surviving (one part) and Alice and Charles both have living descendants (two parts). Bob receives his 33% share, and the remaining 67% is divided further. Edith, Francine, and Joseph’s parents are deceased, and none of their deceased cousins had surviving children, so the remaining 67% of the estate is divided three ways and distributed evenly.

In other states, a “per stirpes” system is used instead of a “per capita” system. A per stirpes system would divide property according to lineage. For example, in this chart, Edith and Francine would each receive half of Alice’s one-third share, or one-sixth of the entire estate. Joseph would receive his father Charles’ entire one-third share, or one-third of the entire estate. Even though Joseph, Edith, and Francine are all orphaned grandchildren of the Decedent, Joseph would receive twice as much as his cousins under a per stirpes system. Because the per stirpes system is used in other states, some Utahns may erroneously expect that system to control their estate. However, if a Utahn prefers the per stirpes system to the per capita system, then they must state so in a Will.

To complete our per capita system explanation, imagine if Harold had two surviving children, and Irene had one surviving child:

3

Here, three surviving great-grandchildren change the distribution of the estate. Bob’s one-third share remains unchanged, but the remaining 67% of the estate is now divided five ways. Three of those parts represent Edith, Francine, and Joseph as surviving grandchildren of decedent. The remaining two parts represent the accounting for Harold and Irene, as deceased grandchildren of the decedent who left children alive. The three parts for Edith, Francine, and Joseph are distributed equally amongst them, while the remaining two-fifths of the 67% of the estate are distributed equally among Lucy, Mary, and Nathan as surviving great-grandchildren of the decedent whose parents and grandparents were not alive to inherit from their great-grandparent.

I know these rules can be daunting, but if you want to die without a Will, it is crucial that you be informed as to what will happen to your property. Once again, if you do not like the per capita system, you can always change it through a Will or Trust. Join us next time as we discuss the ways that the Utah Probate Code recognizes children for inheritance purposes (hint: parents of adopted children can rest easy, but stepparents wanting to leave something to stepchildren had better put something down in writing).


What If I Die Without a Will in Utah? (Part 1-Property Classification)

houses-691586_1280In this series, we will discuss what happens if you die without a Will in Utah, what happens to different types of property, how property is distributed, and what happens to family members. This introduction discusses the ways that property is classified at death and why the rules that are in place for some property will matter to your estate.

The state of dying without a Will is called intestacy. Upon death, there are generally three ways that property is disposed of:

By contract – These items are handled outside of probate and are governed by contracts entered into before death, including trusts, some bank accounts, insurance policies, and property owned jointly with another person

By Will – These items are handled as part of the probate process and, since they are governed by a Last Will and Testament, they are called part of the “Testamentary Estate,” or “Testate Estate.”

Through intestacy – Everything that has not been disposed of by contract or by Will falls under the “Intestate Estate” and is governed by the inheritance rules of the probate code.

Many of the default probate rules on distribution are what most people would choose to happen to their property after death. For example, most people would prefer that their property first go to their spouse, then to their children. However, few people—if any—would prefer to handle their entire estate according to the default rules. Therefore, it is important that people put their most important wishes in a Will, then the default rules can fill in any gaps that the Will may omit due to a change in circumstances.