A trust is an arrangement under which one person, called a trustee, holds legal title to property for another person, called a beneficiary. You can be the trustee of your own living trust, keeping full control over all property held in trust. A “living trust” (also called an “inter vivo” trust by lawyers who can’t give up Latin) is simply a trust you create while you’re alive, rather than one that is created at your death under the terms of your will. The beneficiaries you name in your living trust receive the trust property when you die. A living trust in Utah is an estate planning tool that allows you to use and control your assets while you are alive and pass them to your beneficiaries after your death. A revocable living trust provides flexibility and privacy not available with other estate planning options.
A Utah living trust is created to manage the assets in the trust for the benefit of the grantor, the person setting up the trust. When you create a trust, it makes sense to place as many assets in it as possible to maximize its benefits. Not all qualify; life insurance and retirement accounts are examples of assets that cannot be owned by a trust. You must choose a trustee to manage the trust. It is common to choose yourself to have as much control as possible. You will also need to name a successor trustee to step in after your death. This trustee continues to protect and control the trust assets and distributes them to the beneficiaries you choose according to your instructions. A revocable trust can be altered or revoked. An irrevocable living trust cannot be changed once created.
A living trust Utah allows you to avoid probate for all of your trust assets. Probate is a procedure in which a court approves and enacts the provisions of a will. Probate can take months and can be expensive when you factor in the costs of an attorney, executor, and court fees. Assets passed by the will cannot be transferred until probate is concluded. A trust avoids all of this and can pass assets immediately upon your death if you like. A trust can help you avoid probate in several states, as long as the assets in those states are included in the trust.
Utah has adopted the Uniform Probate Code, so its procedures are not as complex as other states. In addition, if your estate is worth less than $100,000 and does not include real estate, assets can be transferred at your death with a simple, inexpensive procedure. This is less costly than forming a trust. Utah gives a surviving spouse a right of election against a deceased spouse’s estate. This means the spouse has the right to receive a certain percentage of the estate, even if he or she has been disinherited. Assets in a revocable living trust are counted among the assets used for this purpose.
Do I Need A Living Trust In Utah?
The main advantage of making a living trust is to spare your family the expense and delay of probate court proceedings after your death. But do you really need a trust? Utah uses the Uniform Probate Code, which simplifies the probate process, so making a living trust may be more trouble than it saves. Utah has a simplified probate process for small estates (under $100,000). If your net worth will be under this amount when you die, the probate process will be straightforward and relatively inexpensive, so you may not need to worry about avoiding probate with a living trust.
Living trusts are a valuable option to keep in mind when planning for the future. One of the prime benefits is privacy. While a will must go through probate and become part of the public record, a trust is not made public. Your assets, beneficiaries, and transfers are private. Trusts also offer stepped up security since they are more challenging to contest than wills. Creating a living trust places you squarely in control of your assets during life and even after death. While you are alive, the assets are owned in the name of the trust, but you have total control over them. You live in your house and use your assets as you normally would without restriction. After your death, all the assets are already in the trust and the successor trustee steps in and continues managing them. The trustee then distributes the assets to your beneficiaries according to your instructions. Unlike a will, which passes assets as soon as probate concludes, a trust allows you to set specific disbursement dates if you choose.
Your revocable living trust protects you should you become mentally incapacitated. All of your assets are already controlled, owned, and managed by the trust and a conservatorship proceeding is likely unnecessary. While a durable power of attorney can be rejected, a trust cannot be. Your financial life is protected by the trust.
What Happens to a Revocable Trust in Utah After Death?
When a person dies with a revocable trust, the successor trustee has certain responsibilities that must be promptly performed. Unfortunately, it is not uncommon for the trustee to drag his feet, leaving the beneficiaries wondering what their options are. The responsibilities that will come most immediately to the beneficiaries’ attention are the duty to keep the beneficiaries fully informed and the duty to distribute the trust assets to the beneficiaries in a timely manner. If the beneficiaries are not kept fully informed or are not receiving the assets in a timely manner, they should press the trustee for answers and action.
Keep the Beneficiaries Informed
The trustee has a duty to keep the beneficiaries fully informed regarding the operations of the trust. The trustee must send a notice to the trust beneficiaries within 60 days after the death of the settler (the creator of the revocable trust) informing the beneficiaries of the existence of the trust. A copy of the trust instrument should accompany this notice. The trustee should provide the beneficiaries with an itemized list of the trust assets and their values, as well as trust liabilities, as soon as the trustee is able to ascertain them. As the administration of the trust proceeds, the trustee should keep the beneficiaries informed regarding trust income and expenses and any other substantial matters affecting the trust. In addition, the trustee should notify the beneficiaries before the trustee takes any significant action with regard to the trust, in order to give the beneficiaries an opportunity to register objections with the trustee before the action is taken.
Timely Distribution
There is no clear answer as to how long is a reasonable time to administer a revocable trust after the death of the settler. It will vary depending on the composition of the trust assets and the complexity of the issues involved. As long as the beneficiaries are kept fully informed, as described above, they should have a good idea as to whether or not the trustee is moving steadily toward distribution. In most cases, a trustee should probably begin distributing assets to the beneficiaries within a year after death. If this does not occur, and if the beneficiaries do not have a good understanding as to why it is not happening, the beneficiaries should consider asserting their rights.
Beneficiaries’ Options
If a trustee is not keeping the beneficiaries fully informed or is refusing to distribute the trust assets without justification, the beneficiaries should demand that the trustee perform his fiduciary duties. If such demands are not successful, the beneficiaries can file a petition in probate court requesting that the court order the trustee to perform. In addition, a beneficiary may ask the court to impose a variety of sanctions, including removal of the trustee, awarding monetary damages, denial of the trustee’s compensation, and the setting aside of certain transactions that the trustee may have entered into improperly. Of course, the trustee has many responsibilities beyond those discussed above, including the duty to prudently invest trust assets, the duty to file tax returns, the duty to keep trust property segregated from his own property and the duty not to engage in self-dealing.
What Does A Living Trust Do?
There are several reasons to explore setting up and maintaining a living trust for the benefit of those dear to you. Among them are as follows.
Avoid Probate
The most common reason to establish a living trust is to avoid probate, which is the court-supervised process of winding up a deceased individual’s affairs and estate. While probate can tie up loose ends, it’s no secret that it can also be a lengthy, time-consuming, and highly costly process for those involved. Noting this, most grantors turn to a living trust as a means to avoid it and spare their heirs the hassle by avoiding the courts entirely, as property bequeathed under a living trust can transfer to beneficiaries without going through the probate process.
Maintain Privacy
Court records are public, and it’s not uncommon for the process of probate to uncover debts, unpaid balances, sums due to specific individuals, and other details that individuals may wish to keep private. Noting this, if an estate goes through probate, anyone can look up these records and gain access to the information that the grantor and any beneficiaries might prefer to keep private. A living (aka revocable) trust makes it simpler to maintain your privacy by bypassing probate entirely.
Provides Flexibility
It’s not uncommon during the course of an individual’s lifetime for financial or personal situations to change. Bearing this in mind, it’s also relatively common for grantors to wish to change the terms of the trust and retake control over donated assets a process which can be readily facilitated under a living trust. Put simply, you can change the assets contained within a living trust or even the beneficiaries of the trust whenever you desire to do so during your lifetime.
Provides For Minors Or Dependents With Issues Of Concern
Grantors also enjoy the option to tailor the terms of a revocable trust to make sure that loved ones are provided for. For instance, many grantors may have concerns about adult children that are not adept at managing money or may suffer from addiction or chronic illness. A grantor wishing to place conditions on the use or sale of assets contained within the trust can do so as needed. However, a grantor with minor children or a dependent with a disability must also create a will to appoint a guardian (someone who will look out for these dependents) for their minor children.
Provides For Management of Assets In Case Of Grantor’s Disability
Having a trustee in place to handle assets also provides the grantor with a layer of protection should they become disabled and unable to handle their own affairs (and the affairs of the trust). If you’re currently well and able but concerned about the future effects of age or declining health, you can also name yourself a trustee, while also specifying the name of a co-trustee or successor trustee in the trust document. Doing so allows you to serve as the trustee for the living trust for as long as you are able and then pass over management of the trust to the successor trustee as situations dictate.
What Does A Living Trust Not Do?
Of course, as with all legal decisions, there are upsides and downsides to be considered, and limitations to what a living trust can accomplish. Before deciding on the best course of action to achieve your goals, and establishing a revocable trust, you’ll wish to consult with an attorney who specializes in elder law.
Protect Assets From Nursing Home Costs
A revocable trust does not protect assets from being applied to offset nursing home costs when a grantor is applying for Medicaid reimbursement. You’ll wish to consider these potential costs as you age and living conditions shift and be sure to factor them into your financial calculations as you set about planning an estate strategy.
Avoid Estate Taxes
Hoping to save a little money on estate taxes? Unfortunately, it’s a no-go according to the Internal Revenue Service (IRS). So long as a grantor retains control of their assets, these assets will be considered part of their estate upon the grantor’s death.
Help You Save On Legal Costs In The Immediate
You will need to hire an estate attorney to put together the paperwork that’s necessary to help you setup a living trust and then transfer assets into it. Although a worthwhile investment from a long-term perspective, doing so will present you with added expense upfront.
Get you off the Hook on Making Hard Decisions
You’ll still have to discuss and decide which beneficiaries will receive which real estate properties and other assets seldom an enjoyable or comfortable topic. Likewise, you’ll also have to spend time putting together paperwork and documenting assets in detail.
Special Types of Trusts
Beyond those two broad categories, there are a number of different specialty trusts you can incorporate into your estate plan. The type of trust that’s appropriate depends largely on what you need the trust to do.
Marital Trusts (“A” Trust)
A marital trust (or “A” trust) can be established by one spouse for the benefit of the other. When the first spouse passes away, assets in the trust, along with any income the assets generate, are passed on to the surviving spouse. A marital trust would allow the surviving spouse to avoid paying estate taxes on those assets during their lifetime. The surviving spouse’s heirs, however, would be responsible for paying estate taxes on any remaining trust assets that eventually go to them.
Bypass Trusts (“B” or Credit Shelter Trusts)
Married couples may also establish a bypass or credit shelter trust (also known as “B” trust) to reduce the estate tax impact for their heirs. This is a type of irrevocable trust that transfers assets directly from one spouse to another at the time of the first spouse’s death. The surviving spouse, however, doesn’t hold the assets directly. The trustee manages them instead, which allows those assets to avoid going into the spouse’s estate. When the surviving spouse dies, any remaining assets goes to their beneficiaries, free of estate tax.
Charitable Trusts
A charitable trust helps you to create a legacy of giving within your estate plan. There are two types of charitable trusts you can establish: a charitable lead trust and a charitable remainder trust. A charitable lead trust allows you to earmark certain assets for a specific charity or charities, with the rest of your assets going to your beneficiaries when you pass away. A charitable remainder trust allows you to receive income from your assets for a set period of time, with any remaining assets or income going to a charity that you designate.
Generation-Skipping Trusts
If you’d rather transfer assets to your grandchildren than your children, you can choose a generation-skipping trust. This type of trust lets you pass assets to your grandchildren, allowing your children to avoid paying estate taxes on those assets in the process. At the same time, you still have the option to allow your children access to any income that the assets generate.
Life Insurance Trusts
A life insurance trust is an irrevocable trust that you designate specifically to hold life insurance proceeds. You designate the trust as the beneficiary of your life insurance policy; when you die, the policy proceeds go into the trust. The trustee then manages the proceeds on behalf of your beneficiaries. The advantage of an irrevocable life insurance trust is that it allows you to avoid estate taxes on life insurance payouts.
Special Needs Trusts
A special needs trust can help financially provide for a special needs dependent, such as a child, sibling or parent. It does this without compromising their ability to receive government benefits for their disability. The money in the trust allows them to pay for medical care or day-to-day needs while also allowing them to remain eligible for government benefits.
Spendthrift Trusts
A spendthrift trust may give you peace of mind if you’re concerned about your heirs frittering away their inheritance. This type of trust allows you to specify when and how principal trust assets can be accessed by the trust beneficiaries. The purpose of this is to prevent misuse. For instance, you may restrict beneficiaries to only benefiting from the income or interest earned by trust assets, but not the principal amount of the assets themselves.
Testamentary Trusts
A testamentary trust, or will trust, is established through a last will and testament. Once you pass away, the trust becomes irrevocable. The main function of a testamentary trust is to ensure that beneficiaries can only access trust assets at a predetermined time.
Totten Trusts
A Totten trust, also known as a payable-on-death account, lets you put money into a bank account or other security. When you die, the money that you’ve set aside is passed on to the named beneficiary of the account.
Legal Assistance
Individuals who are considering drafting a trust or a will may wish to consult with an estate planning lawyer. He or she can explain the advantages of using a trust as well as a will. He or she can make recommendations based on the specific considerations of the client. He or she may even recommend using both documents, such as by using a pour-over will that places any property owned at the time of the testator’s death into the trust.
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