Estate Planning

The Durable Power of Attorney is a legal document that names an agent or “Attorney in Fact” to act on your behalf. The agent has a duty act in your best interest and can “sign” for you. They can have the authority to enter into contracts for you, sell property including real estate, and open or close financial accounts. Some basic power of attorney forms don’t include many of the expanded powers necessary for your agent to act if you are unable.

If you have a power of attorney, check and see if it has provisions pertaining to digital accounts (social media and financial), retirement plans, claims and litigation, tax matters, government benefits, and trust creation. Not only is important to name an agent to act on your behalf but also name a back-up agent in case your agent is unable or unavailable. This is a document that everybody over age 18 should have regardless of your economic status.

An advance health care directive names an agent you want to act in your behalf should you become unable to communicate. It specifies how much medical care you do or don’t want and who will work with the doctors to determine your care. Your directive will cover your wishes on organ donation and medical research. Your agent may also be allowed access to your medical records. The health care directive in Utah has two parts. Part one deals with choosing your agent and giving them authority to act.

Health care agents are given authority to consent to or refuse care, hire and fire doctors, ask questions, get copies of medical records and get second opinions. If that sounds like a big and important job, it’s because it is! Consult a legal professional to get help on who in your life would be the best person to act on your behalf if you can’t. Most commonly that person is a spouse or other family member, but it doesn’t have to be.

In your health care directive you can also elect to participate in medical research or be an organ donor. If and when you cannot make decisions or speak for yourself, your health care directive will also instruct your agent on your health care wishes (this is a “Living Will“). A Living Will is a legal document that outlines your health care wishes, if you were on life support and/or unable to communicate. How much care do you want for the purpose of prolonging your life? In Utah, there are four options: 1) I choose to let my agent decide, 2) I choose to prolong my life, 3) I choose not to receive care for the purpose of prolonging my life, and 4) I do not wish to express my preferences.

Some of the above options have “sub options” and you can always add additional comments to help your agent and doctors know your true desires. A Health Care Directive must be properly witnessed and copies should be given to your agent and to your health care provider.

A will is a binding legal document that names an executor to administer your estate and also names to whom and in what manner your beneficiaries will receive property. You should know the following about wills:

• A will has no legal authority until after death. It does nothing regarding a person’s affairs when they become incapacitated.
• A will does not help an estate avoid probate, instead a will essentially guarantees probate if assets are held in the testators name only. A will must be submitted to the probate court to allow the appointment of the executor.
• A will is a good place to name guardians of minor children. If you have or expect to have minor children, you need to have a nomination of guardians or you leave the placement of your children to the court’s full discretion subject to possible intense family litigation.

Generally, an irrevocable trust is a type of trust that cannot be changed after it becomes irrevocable without the approval of all the beneficiaries. The trust can be irrevocable at the time of its creation or at another point in time, such as at the death of the trust creator. Irrevocable trusts can be less flexible than a revocable trust but can provide some added benefits such as estate tax reduction, asset protection, charitable estate planning and Medicaid planning.

If your estate has the possibility of exceeding the federal estate tax exemption limits then you may consider some type of irrevocable trust planning such as an irrevocable life insurance trust (ILIT). Premiums can be paid for the insurance benefit and then the proceeds are not in the taxable estate at the time of death. Sometimes the proceeds are used to pay the estate tax.

Another type of estate tax planning trust would be an A/B type trust. An A/B trust is an estate planning strategy designed to minimize estate taxes and ensure the efficient transfer of wealth to heirs. It involves splitting a married couple’s assets into two separate trusts upon the death of the first spouse: the A Trust (or Survivor’s Trust) and the B Trust (or Bypass Trust). The A Trust remains under the control of the surviving spouse and is subject to estate taxes upon their death, while the B Trust is funded with assets up to the federal estate tax exemption limit and is irrevocable, meaning it bypasses the surviving spouse’s taxable estate. This arrangement allows the couple to maximize the use of their combined estate tax exemptions, effectively sheltering a significant portion of their assets from taxation. A/B trusts also provide asset protection, ensure the deceased spouse’s wishes are honored, and offer income for the surviving spouse while preserving wealth for the next generation. However, they require careful planning and management, especially if tax laws or family circumstances change.

Irrevocable trusts can also be used to protect assets from nursing home expenses, if assets are placed in an irrevocable trust five years prior to applying to Medicaid, and all other conditions are met.
Regarding asset protection, the State of Utah allows for a self-settled asset protection trust. A self-settled trust is where the trust creator or grantor is also a beneficiary. Assets in the trust can be protected against creditors and lawsuits. Traditionally this was NOT allowed in the State of Utah but the laws changed in 2013. There are certain criteria for this to work and can be highly complex. This type of trust can be beneficial for professionals (doctors, lawyers, accountants, etc.) that have the potential of being sued.

Irrevocable trust planning is complex and should be set up by an attorney.

A “revocable trust” or “revocable living trust” is probably the most common estate planning trust around. It is widely used because of its flexibility, ease of administration and ability to avoid probate. When a revocable trust is created it specifies who will manage the trust (a trustee) and who the beneficiaries are. Often times the person creating the trust is the initial trustee and its “business as usual” during their lifetime. Once the trust creator passes away, the trust language nominates a successor trustee and outlines in what fashion they must distribute the trust estate. A revocable living trust is created during the creators life time and they can “revoke” or terminate the trust whenever they wish. The trust creator can also amend the trust and change the trustees, beneficiaries, or other trust language.

An important step after creating a revocable trust is funding the trust, this means placing assets in the trust. There are certain advantages of having a trust own property, like real estate. One advantage is that anything owned by the trust can avoid probate for faster, more private and less costly estate administration. There are also disability planning advantages of owning a trust, if the trust owns property and the trust creator/trustee becomes mentally disabled then the successor trustee can step in without court intervention and manage the trust assets. Their are also certain types of property like qualified retirement account that should not be owned outright by the trust during the trust creators lifetime. It is important to speak with an attorney on how to properly fund a trust because if it is done incorrectly, the creators intentions could be frustrated.