Introduction to the Utah Advance Health Care Directive Act

Author's Note: I help maintain certain Thomson Reuters Practical Law resources for trusts and estates in Utah, including their Advance Health Care Directive (UT) resource. I recently helped update this resource as a result of Utah's S.B. 79 - Estate Planning Recodification, which, among other things, changed many Utah statutory references. This post draws upon this Thomson Reuters resource.

An important part of any person's estate plan is the designation of an agent to make health care decisions for the person if they cease to be able to make or communicate their own decisions. Similarly, it is important to provide instructions to govern medical treatment, including wishes for the withholding or withdrawal of life-sustaining care. Utah's Advance Health Care Directive Act provides a statutory form that accomplishes both of these objectives and which is found in Utah Code 75A-3-303.

The statutory form in Utah is optional but highly recommended because it is presumed to be valid if executed properly and is the form that third-party health care providers are generally familiar with. The statutory form consists of two parts: Part I - Health Care Power of Attorney, wherein a health care agent may (but is not required to be) designated, and Part II - Living Will, wherein the individual’s end-of-life treatment preferences are expressed.

In addition to providing for the naming of an agent, Part I sets forth the authority the agent should have. In a guardianship proceeding, the nomination of a guardian often is critical; accordingly, the person executing the health care directive should usually initial "yes" in Part I of the health care directive form to designate the same person named as agent to serve as their guardian. In my practice, this guardian nomination is typically the most important section of the health care directive form.

A person's wishes for end-of-life is often the most important section of the form for agents, successor agents, and family members. Persons executing a health care directive should express their wishes for end-of-life care on Part II of the form but also discuss these wishes with their agents and family and also include any additional language that may clarify their wishes. By executing an Advance Health Care Directive and carefully considering each of the sections of the form, individuals can significantly reduce the possibility for conflict and uncertainty when they reach the end stages of their lives.

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The Jointly-Owned "Convenience Account"

One common source of controversy in end-of-life planning and estate and trust administration is the existence of a financial account owned jointly by the decedent/contributor and another person who is not the sole heir of the decedent's estate. As I discussed in a previous post, the key features of most joint accounts is that any party to the account may unilaterally withdraw the funds in their entirety and the surviving joint account holder will automatically be entitled to retain the remaining amounts in the account upon the death of the other owner. The last will or trust agreement of the decedent would have no impact on this result.

After the death of the owner of the contributor of the funds, the other heirs of the estate may attempt to recoup funds that automatically passed by operation of law by the surviving joint owner. However, this is a difficult and expensive process because the funds will no longer be in the name of the contributor, and the law exonerates the bank if it pays out the funds to the surviving joint owner. In litigation to recover the funds from the surviving joint owner, the court will presume that all aspects of the joint account arrangement are valid and the other heirs will need to overcome this presumption by clear and convincing evidence.

Theories for overcoming the presumption that ownership passes to the surviving joint owner include fraud, mistake, incapacity, or other infirmity. Another theory for overcoming the survivorship presumption on a joint account is that the account was intended as a mere "convenience account," or an account established to assist with handling money and affairs but with no intent to pass ownership of the remaining funds.

Factors that could potentially suggest the existence of a convenience account include the decedent being the sole source of the funds and retaining possession of checkbooks, debit cards, etc.; the failure of the surviving joint owner to assert ownership during the lifetime of the contributor; or the acknowledgment of the non-contributor of the intent to use the funds to provide for the contributor's needs. However, factors that suggest that the account was not set up jointly solely for convenience, but rather with intent to pass ownership, include the account balance being far in excess of what the contributor needed, the contributor relinquishing possession of checkbook, or the non-contributor asserting ownership during lifetime. See McCullough v. Wasserback, 518 P.2d 691 (1974).

In order to avoid disputes, individuals should carefully consider all of the legal implications of creating a new joint account or adding a family member to an existing account as a joint owner. If the account is intended to be a mere convenience account, it should be documented as such along with the contributor's other estate planning documents.

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Old Expired Entities Can Now Be Reinstated in Utah

On March 13, 2024, Utah's governor signed S.B. 14 - Corporate Dissolution Amendments, which is effective beginning this month. Previously, a business entity that had been administratively dissolved for failing to file an annual report only had two years from dissolution in which to file for retroactive reinstatement. Under this new law, entities can apply for reinstatement "under the corporation's same corporate name at any time after the effective date of dissolution," if the corporate name is still available.

This new law is a significant improvement to Utah's corporate regime. Previously, "[t]he termination of the status of an entity as a corporation (for state law purposes) could possibly cause a change in the treatment of the entity for federal income tax purposes, unless the state law action can be treated as irrelevant or is subsequently reversed retroactively." Streng, "IRS Treatment of the State Law Dissolution (and Revitalization) of a Corporation", Real Estate Journal (BNA). In other words, there was at least a question of whether an inadvertent entity dissolution could create irreparable federal income tax problems in Utah simply because retroactive reinstatement after two years was unavailable.

Under the new law, a dissolved entity retains its corporate name for five years and can reinstate under that same name within that five-year timeframe. If the prior name is unavailable, it appears that the same entity can still retroactively reinstate, just under a new name. S.B. 14 will remove legal uncertainty created by inadvertent administrative dissolution of Utah entities.

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Utah Repeals Charitable Solicitation Registration Requirement

As I discussed in a previous post, many states require charitable organizations that solicit money to register before fundraising. Until this month, Utah was included in this group of states where registration was required. However, on March 13, 2024, Utah's Governor signed H.B. 43, Charitable Solicitations Act Amendments, which among other things, "removes a requirement that charitable organizations register with the Division of Consumer Protection."

This new law is effective May 1, 2024, but as of March 29, 2024, the Utah Division of Consumer Protection stopped accepting charitable solicitation registration applications. The new law will require certain charities "to upload their most recent Form 990 as part of the corporation's filing process," which will be the subject of forthcoming administrative rules. This requirement begins on January 1, 2025 and will generally require domestic and foreign nonprofit corporations to "file an unredacted copy of the charitable organization's most recent IRS Form 990, 990-EZ, 990-N, or 990-PF." Note that most 990 forms are currently available on the IRS's Tax Exempt Organization Search website.

Even small Utah charities may still be required to register to legally solicit donations in other states, depending on how they fundraise. While these laws change frequently, this chart by Lowenstein Sandler is a good starting point for researching the requirements that apply to charities across the 50 states. For assistance in understanding the application of these laws, please contact knowledgable legal counsel.

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Filing a BOIR Report for New LLC

The Corporate Transparency Act ("CTA") is now active law, and most new entities formed in 2024 must file a Beneficial Ownership Information Report ("BOIR") identifying their beneficial owners with the Financial Crimes Enforcement Network ("FinCEN") within 90 days of formation. Entities existing prior to 2024 have until the end of this year to file. For an introduction to the Corporate Transparency Act, see my prior post.

FinCEN provides detailed step-by-step instructions for filing a BOIR here, and this post will supplement those instructions. To file a BOIR, visit www.FinCEN.gov and click "File Your Report Now." This will take you to the E-Filing System through which the BOIR is filed. Bank Secrecy Act reporting is also mentioned on this page, but BOIR filing is commenced by clicking "Get Started" where BOIR is referenced. The next page provides two primary options, which are to file a PDF BOIR or an Online BOIR; this post will describe the online alternative.

After agreeing to only use the system for authorized purposes, select the "Type of filing," which for purposes of this post will be an "Initial report" for a newly-formed entity. No login or account is needed in order to file a BOIR. The process is straight-forward and involves simply selecting the correct options and entering the information, first about the reporting company itself and then the applicant(s) and beneficial owner(s).

The next screen asks and then confirms whether the entity is an existing reporting company, meaning one that was already in existence as of January 1, 2024. Entities existing prior to 2024 need not report any company applicant information, but entities formed in 2024 need to provide company applicant information. Applicant information (name, birthdate, address, etc.) can either be provided directly, or if the applicant has previously obtained a FinCEN ID, the ID number can be entered instead. Requiring a FinCEN ID of company applicants and beneficial owners significantly simplifies initial reporting and the requirement to update reports if information about an applicant or owner changes.

After inputting information for all applicants, or their FinCEN IDs, the next page is where beneficial owner information (name, birthdate, address, etc.) is inputted. Note that a clear image of appropriate picture identification must be uploaded for both applicant(s) and beneficial owner(s) if a FinCEN ID is not provided. After the beneficial owner information is inputted, the final page is where certification of the information is provided and the report submitted.

The following page allows the filer to download the transcript of the BOIR, which is critical so that the data submitted can be kept on file by the company for when, among other things, information about the entity changes. Filing and updating BOIRs is an important new requirement for most U.S. entities.

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Introduction to the Corporate Transparency Act

On January 1, 2024, the new federal Corporate Transparency Act will require the vast majority of small U.S. entities to start filing an online report with the Financial Crimes Enforcement Network (FinCEN) and report beneficial ownership. Existing entities will have until January 1, 2025 to file this report, but entities formed in the new year will need to file within 30 days of formation. Reports with FinCEN are already required for, among other things, foreign accounts, which I discussed in a previous post. However, the CTA is a big deal and represents a complete upheaval of current entity formation and maintenance practice. A number of exceptions to the reporting requirements apply, but generally only include large entities or entities that are otherwise subject to an existing regulatory regime, such as financial institutions. In other words, it is small entities that are being targeted by the CTA, and ultimate individual beneficial ownership is the primary reporting objective.

The reporting requirement is imposed upon the "reporting company" itself, which is any entity formed by filing a document with a state agency. This means that most trusts will not themselves be reporting companies but will likely have complex requirements to provide information about various trust participants if the trust owns a reporting company interest. "Senior officers" of a reporting company are liable for penalties of up to $500 for each day that the violation continues, imprisonment for up to two years, and/or a fine of up to $10,000. Beneficial owners of a reporting company that provide false information or refuse to provide information to the reporting company can also face penalties. A beneficial owner is any individual who exercises "substantial control" over a reporting company or owns or controls at least 25 percent of the ownership interests of the reporting company.

The key pieces of information required of beneficial owners include full legal name, date of birth, physical home address (P.O. Boxes are not allowed), and a copy of the individual's driver's license or passport. If any of this information changes, the reporting company must file a change report. Much of the burden of reporting and keeping track of a beneficial owner's change of information appears to be relieved in large part if the beneficial owner obtains his or her own FinCEN identification number and the reporting company reports that number. Given the detailed personal information that is required to be disclosed and the substantial penalties for noncompliance, we will be hearing much more about the CTA at the start of the new year.

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Supported Decision Making Agreements

An emerging phrase in the estates and trusts world is that of "supported decision making." The concept of supported decision making is exactly as unremarkable as it sounds and is simply the idea of individuals looking to help from others in making a decision. Hiring a transactional attorney is to seek supported decision making, and many other professional advisors could also qualify as providing decision support.

However, when used in the context of helping individuals with disabilities, supported decision making represents a paradigm shift from protecting such individuals from poor decisions by inserting a surrogate decision maker to act for them to empowering such individuals to make their own decisions, with support from others. See Nina A. Kohn, Legislating Supported Decision-Making, 58 Harvard Journal on Legislation 313 (2021). Accordingly, one specific objective of supported decision making arrangements is to avoid the need for a guardianship.

Utah has introduced legislation specifying the requirements for supported decision making agreements, H.B. 510. Under the law, if passed, such an agreement must, among other things, be in writing, designate a "supporter," describe the principal's rights and how the principal uses supported decision-making to make decisions, define the responsibilities of each supporter, and be notarized. It must also "describe how any perceived or actual conflict of interest between a supporter and the principal will be mitigated."

Supported decision making agreements are nothing more than contracts that have been and will be executed whether or not H.B. 510 or comparable laws in other states are passed. However, the key benefit of H.B. 510 appears to be codifing what constitutes a supported decision making agreement and protecting third parties who rely in good faith on such agreements. It seems that there could be significant overlap in the utility and coverage of supported decision making agreements and limited powers of attorney, but supported decision making agreement legislation may fill coverage gaps and benefit individuals with disabilities.

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