Revocable Trust

A revocable trust is a method approved under state law to allow you to hold your personal assets under the name of the trust so that on your death, rather than going through probate, the trust agreement itself designates your succession plan. The trust lists a successor trustee to enforce the trust once you die and outlines how that successor trustee is to distribute the property held by the trust. The successor trustee acts by right of contract, and no court intervention (probate) is required. The trust is deemed revocable because you retain the right at any time during your lifetime to amend any of the provisions. Your right to amend includes changing beneficiaries, successor trustees, or how assets are to be distributed. There can be tremendous flexibility in the trust document. It can allow you to take care of special needs children, provide for the care and guardianship of minor children, or designate charities to receive the assets in the manner your direct. Even though the trust is revocable during your lifetime, generally the terms of the trust become irrevocable once you die, so that the successor trustee cannot change how the trust assets are distributed. The successor trustee can only comply with the terms of the trust in distributing the assets. Many times the revocable trust becomes the key foundation to a well-thought-out estate plan and can greatly increase the overall value of your estate planning. It is critical that you receive good counsel in setting up the revocable trust, as improperly drafted or aged trust agreements can have devastating consequences to your overall plan.

Gifting

In some circumstances, your estate may end up being subject to inheritance tax. This tax is based on the overall value of the assets. This status can generally be determined before you die. In order to minimize the tax impact, you are permitted to make gifts to your children up to an annual limit to begin transferring your wealth while you are still alive. The timing, amount, and type of assets you give should be carefully considered for both your tax consequences and the tax consequences you create for the person receiving the gift. For this reason, you should consult your attorney or accountant to get the maximum benefits of lifetime gifting.

Other Methods

In addition to these basic components of a good estate plan, there are a number of other types of trusts, including irrevocable trusts and proper use of limited liability companies or shareholder agreements within closely held corporations, that can also facilitate the transfer of wealth at your death. Depending on your individual and family priorities, a plan can be established specifically to meet your individual needs.

This article is not intended to be legal advice. Receipt of this information does not create an attorney-client relationship.

IRS CIRCULAR 230 DISCLOSURE: In order to comply with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in, omitted from, or implied by this communication (including any attachments) is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

POD (Payable on Death) Bank Accounts

You may wish to designate specific beneficiaries to receive funds in your bank accounts upon your death.  This becomes a contractual relationship between you and the bank or financial institution that does not require court intervention (probate) or any other act by anyone in order for the beneficiaries to obtain the funds left in the accounts.  Depending on the manner and amounts of deposited funds, this method may also have unexpected tax consequences.  Although this does not carry with it the risks of joint tenancy (see earlier post), the funds in the account may become unavailable should you become incapacitated.

Life Insurance

You may choose to name beneficiaries on life insurance policies in certain proportion or on different policies in order to give specific benefits of certain amounts based on the amount of the policy in force.  This is a contractual arrangement between you and the insurance company and does not require any court intervention (probate) in order for the life insurance benefit proceeds to be paid by the insurance company to the beneficiaries.  Typically, an insurance company will make a payout to the beneficiaries within two to three months of your death once it receives notice.  In some circumstances, a life insurance policy can provide the means for your beneficiaries to have adequate funds to meet certain estate tax obligations. One important point to consider in your planning is whether the beneficiaries named on life insurance are consistent with beneficiary designations you have made elsewhere.  Inconsistencies on life insurance beneficiary forms may create confusion for your heirs as to what you intended to happen at death. 

Will 

A will is a document used to convey assets from one generation to another or to other people or charities.  The will can give specific directions as to how bank accounts or other financial accounts, real property, or personal property are distributed after your death.  In order for the will to be enforceable, it must be processed through a court in a procedure called probate.  One of the key purposes of probate is having a person designated as the personal representative (aka executor) for your estate.  The personal representative then has authority to act on behalf of the estate according to the provisions of the will to sign documents that otherwise would require your signature.  The personal representative can then interact with financial institutions to transfer funds and assets as directed under the will.  A probate procedure can have costs and expenses of a few thousand dollars to tens of thousands of dollars, depending on how the beneficiaries are getting along and how many assets are involved.  All estate information, including the identity of beneficiaries, is part of the public filings in the probate proceedings in court.  This includes identifying the total assets, their values, and to whom they were distributed under the terms of the will.  Some people prefer privacy regarding their estate and seek to avoid probate where possible.

This article is not intended to be legal advice.  Receipt of this information does not create an attorney-client relationship.

IRS CIRCULAR 230 DISCLOSURE:  In order to comply with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in, omitted from, or implied by this communication (including any attachments) is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

There are many ways to make sure your bank accounts, real properties, or other personal assets are passed on to the person you want to benefit. One key factor in determining the right methods for transferring assets to your loved ones is a thoughtful consideration of the tax consequences for you as well as for the recipient. I will leave to those who comment on this article whether there should be taxes assessed on the assets transferred at your death, but, for now, sound tax planning is an issue.

Because there are many different ways to accomplish transferring your property from you to others, there is no “one-size-fits-all” plan that can be used. Depending on your own circumstances and the value of your assets, some methods may have more serious tax consequences than others. When trying to determine what will work best for you, it is a good idea to talk with an attorney experienced in estate planning. You may also want to consult an accountant. Even after you create a plan it is also worthwhile to review your plan every four to five years to make sure it still meets your goals and amend it as needed.

Because of the complexities involved, this material will be covered in three parts that will summarize some of the various mechanisms by which you may transfer assets to your children or others. These summaries are intended to serve as an outline of possible options to discuss with your attorney or accountant, and it is not an exhaustive list.

Joint Tenancy

You may decide to title your real property in joint tenancy, either with your spouse, one of your children, or a friend. When there are two people owning property in joint tenancy, the joint tenancy means that one surviving the other gets all of the property free and clear by simply recording an appropriate affidavit with the recorder’s office about the passing of the joint tenant. There is no court intervention (probate) required and, upon filing the affidavit, title to the property will be deemed to be in the name of the surviving joint tenant. This principle applies to real property, bank accounts, and vehicle titles. One of the drawbacks of this method in relation to real property is that the tax basis will generally be the purchase price paid by the joint tenant who originally purchased the property. This may greatly impact the amount of capital gains tax paid when the property is sold. Another drawback that affects an asset held in joint tenancy is that the property can be used to satisfy the debts of the person you add as a joint tenant, thereby putting your property at risk during your lifetime. There are other tax consequences that may apply to using this method to pass wealth from one generation to another. While there are many benefits to using joint tenancy as a method to transfer wealth, including speed and simplicity of transfer, there are common risks and tax consequences people do not consider, so you should be cautious, and well-informed, prior to using joint tenancy to transfer property from one generation to another.

This article is not intended to be legal advice. Receipt of this information does not create an attorney-client relationship.

IRS CIRCULAR 230 DISCLOSURE: In order to comply with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in, omitted from, or implied by this communication (including any attachments) is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

You may prefer not to be kept alive under such conditions. The living will document was designed to enable you to give direction to health care providers to discontinue use of medical equipment or other care, including a “do-not-resuscitate” order, when certain conditions are met. In addition, you may appoint an agent to make health care-related decisions for you when you cannot make decisions for yourself (sometimes called a health care power of attorney). Such an agent can, on your behalf if you are incapacitated, make decisions about medical care, consult with physicians about prognosis and diagnosis, and make other decisions about discharge from the hospital or admittance into a long-term care facility.

Over the years, some health care providers have, on occasion, challenged the right of an agent to act on a person’s behalf in directing medical care. Because of the cost, the agent would not fight the provider. Therefore, the person’s health care directive would be ignored. The Utah legislature determined that this should not be so, and it passed laws that  require health providers to abide by the directive of a person if that person uses a particular form developed by the legislature. This form, called a “medical directive,” requires health care providers to pay the attorney’s fees and costs of the agent who fights to enforce the medical directive. This is a strong incentive for health care providers to abide by the terms and conditions of the medical directive.

The key part of a medical directive is to set forth your desire that you do not want to prolong life in certain situations where you are being kept alive by medical equipment. The medical directive has several options that allow you to be quite specific about when you want medical treatment to be withheld. However, no matter what is stated in the medical directive, it is only effective when you are unable to express yourself competently. As long as you are able to give direction to health care providers, whatever you want to have done takes control over the medical directive.

This article is not intended to be legal advice. Receipt of this information does not create an attorney-client relationship.

St. George topped all small cities with populations of 150,000 or fewer in the survey. The city has 110,515 residents who enjoy a mild climate, clean air and low annual precipitation. It also has the lowest crime rates of all the 379 communities surveyed. St. George stands first in employment rate among the 138 small towns in the Farmers study.

Click this link for more from the Sacramento Bee:

http://sacramento10.cityspur.com/2009/11/24/where-are-the-safest-places-to-live-in-the-united-states/

Through this arrangement, Jones Waldo will offer Utah companies access to legal resources and strategic business advice regarding opportunities in China, a rapidly expanding area of the global economy. We are excited to be at the forefront of companies who see the value of thinking globally and look forward to assisting business owners who are ready to benefit from the opportunities that are waiting.

We’ll be posting items of interest concerning doing business in or with China. Let us know if there is a particular topic you’d like to know more about.

• The Trustee is authorized to destroy those client files for which two notification letters have been sent with no response from the file’s owner. Such files may be destroyed 30 days after the second letter is sent.
•  Files that appear to have been closed, with no activity for four or more years, may be destroyed by the Trustee.

Files will be destroyed by a commercial shredding operation. We urge you to contact Sheila Berger at 435 628-1627 if you have received a notification letter from the Trustee and have not made arrangements to pick up your file.

This implied covenant of good faith and fair dealing cannot change the actual written terms of any of the clauses of a written contract, and a court cannot use it to negate or ignore a specific written term of agreement between the parties.  However, many times a contract will include language which purports to give a decision to one party at its “sole discretion” or with its “complete discretion.”  If the contract includes such a clause, sometimes a person may mistakenly believe that he has an unfettered right to make his decision without any regard to how it might impact the other party.  In fact, some have chosen to exercise their discretion in order to create the most negative impact on the other party as possible.

Utah appellate courts have held that when a party exercises its “sole discretion,” it must do so according to specific terms and standards set forth in the contract.  If there are no such specific criteria or standards as to how to exercise its discretion, the party exercising its “sole discretion” cannot decide to make a decision that harms the other party and keeps it from being able to receive its benefit under the contract.  In other words, sole discretion should be viewed as sole “reasonable” discretion.

In a recent Utah Court of Appeals decision, Markham v. Bradley, 2007 UT App 379, 173 P.3d 865, the Court of Appeals determined that the sellers under a standard Real Estate Purchase Contract had breached the implied covenant of good faith and fair dealing when they improperly rejected the buyers’ financial information received as part of their seller financing agreement.  In addition, the sellers had decided not to sell to the buyers even though the buyers had obtained other financing and were able to close on time.  The court determined that the sellers had breached the implied covenant of good faith and fair dealing by not properly evaluating the financial documents provided by the buyers.  Therefore, the sellers’ rejection of the buyers’ financial documents was not done in good faith.  The court ruled that the sellers were obligated to complete the sale of the property to the buyers.

For parties entering contracts regarding leases, purchase of property, or other contracts where there are a variety of different duties and obligations for each party to perform, the parties need to remember that a court can evaluate whether the parties are treating each other fairly and, if a party tries to take advantage of the other party in a way that shows an action in bad faith where its discretion is involved, there is a good chance that a court will not look favorably on the party acting in bad faith.

This article is not intended to be legal advice.  Receipt of this information does not create an attorney-client relationship.

When a person has borrowed money to purchase property, build a structure, or add on to an existing building, the lender generally requires that the borrower execute not only a promissory note promising to pay back the money, but a trust deed as well, putting the title to the property in trust to be held for the benefit of the lender in case of nonpayment. A qualified trustee is appointed in the trust deed and is responsible to carry out the terms in case of nonpayment by the borrower. In a typical transaction, the trust deed requires the borrower to make its monthly payments, keep taxes current, and perform upkeep and maintenance on the property as might be needed under the circumstances. As long as the borrower is current in all of its payments and obligations, the fact that the trust deed exists is of no particular consequence. It is important to remember that the borrower is the owner of the real property and has all rights and obligations of ownership. By signing the trust deed, the borrower has simply placed some restrictions to its property rights in relation to the transfer of title. The lender does not retain any ownership rights in the property, but is limited to exercising only those rights allowed in the trust deed to the extent permitted by Utah law.

If the borrower is late in its payment or defaults on other obligations, the lender has the right to start the foreclosure process by “notice of default” with the county recorder and sending a copy to the borrower. This triggers a 90-day time period wherein, if the borrower can pay all of the arrears current, together with any costs and fees associated with the notice of default, the lender must be reinstate the borrower in the loan and void the notice of default. If within 90 days the borrower cannot bring the arrearage current, the lender has the right to have the trustee sell the property. If the trust deed covers more than one parcel of real property, the borrower can appear at the sale and demand that the parcels be sold separately and in a particular order. The trustee has a duty to follow the instruction of the borrower as to which parcel to sell first to satisfy the debt.

The borrower’s rights do not end when the 90 days has run. Prior to the sale date, the borrower still has the contractual right to pay off the promissory note in full, including and fees and penalties, which the lender must accept. The lender does not have the right to refuse the full payment in order to get a property that may now have a high equity value.

This article is not intended to be legal advice. Receipt of this information does not create an attorney-client relationship.