Welcome to CPA at Law, helping individuals and small businesses plan for the future and keep what they have.

This is the personal blog of Sterling Olander, a Certified Public Accountant and Utah-licensed attorney. For over nine years, I have assisted clients with estate planning and administration, tax mitigation, tax controversies, small business planning, asset protection, and nonprofit law.

I write about any legal, tax, or technological information that I find interesting or useful in serving my clients. All ideas expressed herein are my own and don't constitute legal or tax advice.

Co-Fiduciaries in Probate and Planning

The terms of fundamental estate planning documents always include designating a fiduciary in each such document. Specifically, a last will will designate a personal representative of the estate, a power of attorney and health care directive will designate an agent to make decisions during life, and a trust agreement will designate a successor trustee. If an individual does not have a power of attorney or health care directive, a guardianship and conservatorship will sometimes be required, wherein the court will appoint a guardian and/or conservator.

There are obvious benefits in designating multiple co-fiduciaries in any of these situations as opposed to a single fiduciary. Co-fiduciaries can provide a check and a balance on each other and share the burdens of serving in the role. The primary downside is more complexity in carrying out the co-fiduciaries' duties because often multiple fiduciaries will need to act together in signing documents or taking other action.

The terms of the relevant governance document must always specify whether co-fiduciaries can act independently or if they must act together. State law provides default answers in certain circumstances, but it is not always clear or predictable what the default rule is. Utah Code 75-3-716 states that co-personal representatives of an estate generally act by majority vote unless the will provides otherwise, and Utah Code 75-7-703 addresses co-trustees and by default would require the action of both. Utah Code 75-2a-108 also provides for majority vote in the health-care decision-making context.

However, Utah Code 75-9-111 has the opposite default in the case of co-agents under a power of attorney, meaning that each can act independently unless the governing document provides otherwise. The comments to the Uniform Probate Code indicate that some questions as to whether co-fiduciaries must act together were deliberately left to state law, and in Utah anyway, it is unclear what the default rule is in the case of co-guardians and co-conservators. Best practices clearly require the governing document or court order to specify whether co-fiduciaries can act independently or whether they must act together.

Introduction to Premarital Agreements

A prenuptial or premarital agreement refers to "an agreement between prospective spouses made in contemplation of marriage and to be effective upon marriage." Such agreements are strongly recommended anytime an individual with separate assets intends to marry.

The reason why a premarital agreement is important is because, by virtue of a marriage, spouses assume certain legal duties and obtain certain rights with respect to their spouse and their spouse's assets, especially in the event of divorce or death. For example, in the event of divorce in Utah after a long-term marriage, a judge would likely award alimony to one spouse to the extent needed to maintain the lifestyle they enjoyed during the marriage for a period up to the length of the marriage. Alimony can and often is a negotiated term of a premarital agreement.

Another example of a right that a surviving spouse has in Utah is the right to an "elective share" of the assets of the first spouse to pass away, calculated as one-third of the "augmented estate." This right of election effectively makes it nearly impossible to disinherit a spouse, even in very short-term marriages, and even where a trust or other non-probate transfers are involved.

The right to an elective share can be waived, and often is waived in a premarital agreement. However, the waiver can be set aside by a court pursuant to Utah Code 75-2-213(2), which contains essentially the same standard for setting aside a premarital agreement itself under Utah Code 30-8-6(1). Specifically, such agreements must be voluntary and not fraudulent (or not "unconscionable" in the case of an elective share waiver) and must have been accompanied by adequate disclosure or knowledge of the property or financial obligations of the other spouse.

There are of course many additional legal implications of a marriage and a premarital agreement. These should be discussed with an experienced attorney well in advance of the wedding date.

Utah Declaration for Mental Health Treatment

The Utah Advance Health Care Directive Act, among other things, allows an individual to sign an Advance Health Care Directive and appoint an agent to make health care decisions on their behalf. However, "[a]n adult's current health care decisions, however expressed or indicated, always supersede an adult's prior decisions or health care directives." This raises the question as to how an agent or medical professional can help someone who is refusing necessary care or otherwise acting contrary to their best interests.

A common course of action in this scenario is to seek guardianship, possibly on an emergency basis, over the person who is acting contrary to their own best interests. However, this can be an expensive, invasive, and time-consuming process that may lead to a court dismissal of the guardianship or a guardianship that unduly restricts the protected person's rights.

One alternative that is worth considering in Utah for anyone with mental health struggles is a Declaration for Mental Health Treatment. The key difference between this declaration and an Advance Health Care Directive is that a Declaration for Mental Health Treatment may not be revoked if the principal is considered incapable of making mental health treatment decisions by two physicians. In such a scenario, a declaration allows the declarant's agent to make decisions about mental health treatment as expressed in the declaration even if the declarant expresses contrary preferences or attempts to revoke the declaration.

For an excellent article on psychiatric advance directives like Utah's Declaration for Mental Health Treatment, see Mental Health Directives in Estate-Planning Engagements in Trusts & Estates by Moira S. Laidlaw. Such directives are an important tool that strikes a balance between the potential inefficacy of an Advance Health Care Directive and the overbearing nature of a guardianship for individuals experiencing an acute psychiatric episode.

Utah's Guardianship Bill of Rights

According to the American Bar Association, "Since 2015, at least 18 states have passed legislation to focus on the rights of individuals under guardianship, while others with existing laws have modified and strengthened those laws." Utah was added to this list earlier this year when H.B. 320, the Guardianship Bill of Rights, was passed and signed into law.

The Guardianship Bill of Rights "addresses the rights of a person alleged to be incapacitated with respect to a guardianship" and also "addresses the rights of an incapacitated person with respect to a guardianship." While it was always clear that an adult person alleged to be incapacitated had a right to be represented by an attorney prior to having a guardian appointed, that right was less clear after having been declared incapacitated and having a guardian appointed. After all, is a person under full guardianship legally capable of retaining an attorney?

The Guardianship Bill of Rights specifies that "an incapacitated person for whom a guardian is appointed has [the] right to... have counsel represent the incapacitated person at any time after the guardian is appointed." This is an important clarification that will help prevent guardianship abuse.

Another important right that persons under guardianship have is to "receive telephone calls and personal mail and associate with relatives and acquaintances." This section works with Utah Code 75-5-312.5 to help address the "anecdotal evidence... that guardians, either well-meaning or for personal gain, have restricted the protected person’s access to their family..." The Guardianship Bill of Rights is an important law that provides meaningful protection for vulnerable individuals.

The Uniform Transfer on Death Security Registration Act

In a prior post, I discussed the trend in probate law whereby nontestamentary arrangements are increasingly favored as ways to transfer property upon death without the need for probate. One such arrangement that I have written about previously is the Uniform Real Property Transfer on Death Act. Another such arrangement is the Uniform Transfer on Death Security Registration Act.

The purpose of the UTODSRA is "to allow the owner of securities to register the title in transfer-on-death (TOD) form," thus providing for a non-probate mechanism for transferring a security upon the death of the owner. Under the act, one or more individuals who own a security can take ownership in "beneficiary form," which simply means that ownership reflects the name of the registered owner(s), followed by the words “transfer on death”, “TOD”, “pay on death”, or “POD,” followed by the name of the beneficiary.

The UTODSRA extends to interests in private companies, including limited liability companies. This can be very beneficial because it is often families of small business owners that have the greatest need for a simple, low-cost alternative to probate.

Many buy-sell agreements restrict ownership of a business to a small group of individuals and provide for the buy-out of an owner upon death. However, depending on the terms of the buy-sell agreement and the owner's individual estate plan, the successor of a deceased business owner may need to go through probate in order to give the manager of the business assurance that the proceeds of the interest buy-out are paid to the right person. The UTODSRA provides one option for streamlining the effectuation of a buy-sell agreement upon the death of a business owner.

Allocating a Decedent's Joint Debts Secured by Jointly-Owned Property

One of the tasks that needs to be completed in the process of administering a decedent's estate is to determine what debts the decedent owed and arrange for payment of those debts. Sometimes, decedents may be joint obligors on a debt with another person, in which case the estate may be liable for a portion of the debt.

Under common law, even if the decedent was jointly obligated on a debt that was secured by property owned in joint tenancy, the estate still had an obligation to pay a share of the debt even though the underlying property passed in its entirety to the surviving joint tenant. The majority rule permits contribution by the estate to the surviving joint tenant, while the minority rule does not; however, the trend does seem to be towards the minority rule. In 1998, the Supreme Court of Rhode Island in Mellor v. O'Connor, 712 A.2d 375 (R.I., 1998), settled the issue in that state by rejecting the majority rule, holding that the surviving joint tenant was not entitled to contribution from the estate of the decedent for payment of a jointly executed promissory note secured by a mortgage on the property. For a critique of this decision, see this analysis by Patrick A. Randolph, Jr., then a professor at UMKC School of Law.

Section 2-607 of the Uniform Probate Code provides that a "specific devise [under a will] passes subject to any mortgage interest existing at the date of death, without right of exoneration, regardless of a general directive in the will to pay debts." In other words, if a decedent's will leaves a property to a beneficiary, and the property is subject to a debt, the beneficiary is not entitled to contribution from the estate for payment of the debt.

In 2012, the Supreme Court of Montana in In re Estate of Afrank, 291 P.3d 576 (Mont. 2012), held that a debt encumbering property held in joint tenancy is not exonerated upon the death of one of the joint tenants, meaning that the surviving joint tenant is not entitled to contribution from the estate for a share of the encumbrance. While the property did not pass via will, the Court looked to Montana's Uniform Probate Code and applied the policy of nonexoneration to the case at hand.

This issue has not been decided in Utah, where presumably the majority rule under common law would prevail:
In a majority of jurisdictions the courts have taken the view, at least in the absence of evidence of other intention or special circumstances, that a surviving spouse is entitled to equitable contribution out of the estate of a deceased spouse, in reimbursement of the payment by the survivor of more than his equitable share of their joint obligation, even though the debt is secured by real property which was held by them as tenants by the entirety, and which, therefore, is wholly acquired by the surviving spouse as surviving tenant, leaving the estate of the deceased spouse with no interest therein. 76 A.L.R.2d 1004

Presumption of Beneficiary Designation Revocation by Divorce

When a couple gets divorced, the division of each and every asset they own must be specified in the divorce decree. Equally as important, the former spouses must update their estate plans after their divorce is finalized, including all beneficiary designations, consistent with the divorce decree. Frequently, however, this does not happen, and the family of a divorced individual who has passed away often finds a former spouse designated as beneficiary on a retirement account or life insurance policy.

In Utah, "[e]xcept as provided by the express terms of a governing instrument, a court order, or a contract [such as a prenuptial agreement], the divorce... revokes any revocable... disposition or appointment of property made by a divorced individual to the individual's former spouse in a governing instrument..." A "governing instrument" in this context includes a beneficiary designation, meaning that if an individual names their spouse as a beneficiary of a retirement account or life insurance policy, then gets divorced without updating the designation, and then passes away, the beneficiary designation is deemed to have been revoked by the divorce, barring a contrary provision in a contract or court order.

The Utah Supreme Court has interpreted this section as creating "a rebuttable presumption that a beneficiary designation... is revoked upon divorce. The presumption can be rebutted by express terms in the life insurance policy; a court order, including a decree of divorce; or a 'contract relating to the division of the marital estate made between the divorced individuals.'" Hertzske v. Snyder, 390 P.3d 307, 311 (2017).

A third-party payor, such as a life insurance company, "is liable for a payment made or other action taken after the payor... received written notice of a claimed forfeiture or revocation..." Such notice must be "mailed to the payor's or other third party's main office or home by registered or certified mail, return receipt requested, or served upon the payor." While these provisions may be overruled by federal law or a benefits plan, they are designed to ensure that a divorced spouse's probable intent in removing their ex-spouse from a beneficiary designation after a divorce is enforced even if the beneficiary designation was not actually changed.