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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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.

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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.

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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.

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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. 

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What is an Advancement?

In the estate planning and administration context, an advancement is a gift made to an heir prior to death that is treated as an advance on the heir's ultimate share of the estate. For example, if dad made a $50 advancement to son during his lifetime, died intestate with $100 to his name, and had three children and no spouse, the two children that had not received lifetime gifts would split the $100 equally. The $50 is treated as an advance on the son's ultimate inheritance; otherwise, the remaining $100 would be split three ways, with the son receiving in total a disproportionate share.

Under the Uniform Probate Code, a gift made prior to death is only treated as an advancement if accompanied by contemporaneous written documentation that the gift is to be treated as such. While the concept of an advancement can only technically apply where a decedent dies intestate and left documentation of intent to treat a gift as an advancement, my will and trust form language includes a provision confirming that any prior gifts are not advancements. It is important for clients to consider the impact that providing additional support and resources to one heir during life can have on all heirs upon death.

The comments to the Uniform Probate Code provide a good example of how advancements work, which I simplify here: G died intestate, survived by his three children, A, B, and C. G’s probate estate is valued at $60, but during his lifetime, G had advanced A $50 and B $10 and memorialized in writing that such gifts be advancements. Upon G's death, the first step in calculating the children's respective shares in G's estate is to add back the advancements, resulting in a theoretical "hotchpot" estate of $120 (60 + 50 + 10), of which the three children would be entitled to equal shares.

Because A has received an advancement greater than the share to which he is entitled, A can retain the $50 advancement but is not entitled to any additional amount. This leaves $70 (60 + 10) remaining in the hotchpot estate, of which B and C are each entitled to half. B receives $25 (having already received $10) and C receives the remaining $35. Had A and B's gifts not been treated as advancements, A would have received $70, B would have received $30, and C would have received $20 from G's estate (aggregating pre-death gifts with an equal share of the remaining estate). This example illustrates why it is important to consult with an estate planning attorney prior to making substantial, disproportionate gifts to heirs.

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Review of Estate Planning Documents

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Reducing Estate Taxes with Annual Exclusion Gifting

Subject to new legislation passed under the Biden administration, United States taxpayers pay an estate tax on death to the extent that the value of their estate exceeds $11,700,000 in 2021; the estate tax is a tax on the right to transfer property upon death. It cannot be avoided by making lifetime gifts to heirs because most such gifts reduce this estate tax lifetime exclusion amount. If the lifetime exclusion amount is exhausted, a gift tax applies in lieu of the estate tax.

In general, any gift is taxable, meaning that the gift will either reduce the lifetime exclusion or require the payment of a gift tax by the donor if the donor's lifetime exclusion has been exhausted. However, there are a number of important exceptions to the rule that any gift is taxable. One such exception is the annual exclusion.

"If a taxpayer makes a gift to another person, the gift tax usually does not apply until the value of the gift exceeds the annual exclusion amount for the year." The annual exclusion is indexed for inflation and is $15,000 in 2021. Under current law, every taxpayer can gift up to $15,000 per year to an unlimited number of donees. Married couples can each make an annual exclusion gift from their own property, essentially doubling the annual exclusion amount. To qualify for the annual exclusion, the gift must be of a "present interest" in property, meaning a gift that the donee can access and use immediately.

An annual exclusion gifting plan can remove significant wealth from a taxpayer's estate over time, thus reducing future gift and estate taxes. For example, a couple with three children and nine grandchildren can potentially gift $360,000 ($15,000 x 2 spouses x 12 heirs) to their family every year without even the need to file a gift tax return. However, there is no requirement that the donee be a family member, meaning that the class of potential donees is only limited by the pool of beneficiaries who the donor wishes to benefit. Annual exclusion gifting should be coordinated with other gifting and tax-mitigation planning but is an important estate and gift tax mitigation tool.

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Control of Disposition of Remains

Anyone completing an estate plan should consider leaving written instructions regarding their wishes for their funeral and the disposition of their body. Section 3-701 of the Uniform Probate Code states that "a person named executor in a will may carry out written instructions of the decedent relating to the decedent’s body, funeral, and burial arrangements" prior to being actually appointed by a court. Most family disagreements over funeral-related matters that arise when a loved one passes away are resolved by negotiations amongst the family, sometimes with the assistance of experienced funeral directors and clergy. However, some disagreements, such as control over the disposition of the decedent's body, can be more serious and cannot be resolved without court intervention.

There is little uniformity among the states in this area. See generally Shawn Irwin Walker, Over My Dead Body: Preventing and Resolving Disputes Regarding the Disposition of the Dead, 43 ACTEC L.J. 385, 388 (2018). Utah is one of the states that has a "priority of decision" law, which is found in Part 6, Control of Disposition, of the Funeral Services Licensing Act. Section 58-9-601 of the Utah Code confirms the probate code concept that a decedent's written instructions concerning their funeral and manner of burial are enforceable but adds the requirement that such instructions be "acknowledged before a notary public or executed with the same formalities required of a will..."

Another interesting aspect of this law is the fact that the nominated personal representative under the decedent's will, depending on the circumstances, may not have first, or even second, priority to control the disposition of the decedent's body. The person with first priority is whoever is designated "in a written instrument, excluding a power of attorney..., if the written instrument is acknowledged before a Notary Public or executed with the same formalities required of a will..."

The person identified as "personal representative" in the decedent's will may appear to fit this description; however this section is clearly describing a distinct role because section 58-9-602(3) of the Utah Code identifies "the person nominated to serve as the personal representative of the decedent's estate in a will" as the one with third priority. Second in line is "the surviving, legally recognized spouse of the decedent, unless a personal representative was nominated by the decedent subsequent to the marriage, in which case the personal representative shall take priority over the spouse."

A few different measures could be taken in order to prevent disputes over the disposition of a body. First, individuals could specify in their will that they are designating their personal representative as the person with the right and duty to control the disposition of the body under Utah Code 58-9-602. Such designee should be aware of the scenarios under which they could lose their right of disposition and also the process for resolving disputes. Finally, individuals should leave notarized instructions to their next of kin specifying their funeral and burial wishes. 

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Utah Adopts Uniform Electronic Wills Act

Beginning August 31, 2020, pursuant to the Uniform Electronic Wills Act, Utahns have the option of executing a last will and testament without the traditional paper and ink and physical presence of witnesses. Before the adoption of the Electronic Wills Act, wills in Utah were generally required to (i) be in writing, (b) signed by the testator, and (c) signed by at least two individuals, each of whom signed within a reasonable time after witnessing the signing of the will. The Electronic Wills Act keeps each of these requirements but adapts them for a modern world.

An electronic will must still be "in writing," or more particularly, in "a record that is readable as text at the time of signing." A "record" includes electronically-stored information "retrievable in perceivable form." Importantly, a video or audio recording of the testator's last wishes does not constitute a will because the electronic files would not be "readable as text."

An electronic will must still be signed by the testator, but under the Electronic Wills Act, "signing" includes executing or adopting a tangible symbol or logically associating with the record a symbol or process with the intent of authenticating or adopting the record as the last will. The Electronic Wills Act is designed to be flexible enough so that no particular software or application is needed to adopt a will.

Finally, an electronic will must still be signed by two individual witnesses who observed the testator sign the electronic will, but such individuals need not be in the physical presence of the testator; electronic presence is sufficient. Under the Electronic Wills Act, "electronic presence" requires that the witnesses be "communicating in real time to the same extent as if the individuals were physically present." An electronic will may be simultaneously executed, attested, and made self-proving with the help of a notary public as described in Utah Code 75-2-1408.  This section expressly supersedes the Notaries Public Act, meaning that remote notarization appears to be permitted in the context of an electronic will.

Estate planning practitioners have resisted laws permitting electronic wills for many years, fearing that electronic wills would be more likely to result in contests and other estate controversy. While these concerns will likely persist, the current pandemic has clearly illustrated the need for an electronic wills option. Currently, Utah is one of only a handful of states have adopted an electronic will statute, but more states are sure to follow.

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Updating Estate Plans for the SECURE Act

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was enacted on December 20, 2019. The Act made a number of changes to how retirement plans function, such as increasing the age at which retirement plan participants need to take required minimum distributions (RMDs) to 72, making it easier for small business owners to set up and maintain retirement plans, and allowing many part-time workers to participate in a retirement plan. However, the SECURE Act made an important change that impacts the see-through trust rules, which will require many individuals to update their revocable living trust agreements and estate plans.

Prior to the SECURE Act, non-spouse beneficiaries who inherited a retirement plan or IRA (i.e., descendants of the IRA owner) could qualify to "stretch" their inherited IRA and take RMDs calculated based on the descendant's life expectancy. This was generally a good thing because it resulted in the maximum deferral of income taxes, and trusts were drafted to help ensure that this stretch opportunity was realized where a trust was named as the beneficiary of an IRA. I discussed how trusts can qualify as beneficiaries of an IRA in a prior post.

The SECURE Act largely eliminated the law that allowed non-spouse IRA beneficiaries to stretch IRA distributions over their life expectancy. Now, most non-spouse beneficiaries must receive (and take into income) the entire IRA account balance within ten years of the death of the account owner, regardless of whether the beneficiary or a trust for the beneficiary's benefit was the named IRA beneficiary. There are good reasons why an account owner would want to name a trust as the beneficiary of their IRA, such as protecting an imprudent beneficiary from squandering an inheritance, including inherited IRA funds. This need still exists, but because of the SECURE Act, many trust provisions describing the trustee's obligations with respect to IRAs need to be changed.

Specifically, many trust agreements drafted before the SECURE Act provided that trust beneficiaries would receive their inheritances in a continuing trust known as as a "conduit trust" for IRA purposes. A conduit trust requires the immediate distribution of all funds withdrawn from the IRA to the individual trust beneficiary. The ten-year rule under the SECURE Act would, therefore, result in trust beneficiaries receiving all of the inherited IRA funds ten years after the account owner's death. A large, mandatory trust distribution at a fixed time during a trust beneficiary's life is inconsistent with what most trustmakers intend in naming trusts as IRA beneficiaries in the first place. Even worse, however, is that trusts that are not amended to function appropriately under the SECURE Act and which are designated as IRA beneficiaries could even result in the ten-year stretch being reduced to five years.

Most post-SECURE Act trust agreements will have beneficiary's continuing trusts qualify as "accumulation trusts," as opposed to conduit trusts, for IRAs paid to such trust, which would not require the immediate distribution of IRA funds. Post-SECURE Act trust agreements will also be drafted consistent with the SECURE ACT's exception to the ten-year IRA payout rule for individual beneficiaries less than ten years younger than the account owner and disabled and chronically ill individuals, who can continue to take distributions over their their life expectancy. Disabled beneficiaries in particular may benefit from inheriting an IRA through a continuing trust, but it is critical that such a trust be calibrated to the SECURE Act to ensure the lifetime stretch opportunity is preserved. In sum, now is the time to update your estate plan so that it functions properly under the SECURE Act.

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Free, Simple Last Will and Testament Form

Below is a very simple form for a last will and testament that you are welcome to use for free, subject to this disclaimer and to the following: Executing a will does not guarantee that all, or even most, of your property will be subject to the will. A last will and testament will have no impact on property held in joint tenancy with a surviving tenant; retirement plans, brokerage accounts, and life insurance policies that have a valid beneficiary designation; pay-on-death bank accounts; and property titled in trust. A will alone will not allow your estate to avoid probate, and a will is only one component of a complete estate plan.

This will form is not appropriate for every circumstance, and only a competent estate planning attorney can provide advice regarding your particular situation. Under Utah law, this will form will be unenforceable unless it is (1) completed and signed by you and signed by two adults who witnessed you sign the will or (2) entirely handwritten and signed by the you. While witnessed wills are preferred, I have kept this will form short enough that it can be handwritten, in which case no witnesses are required. Once complete, you will need to deposit your will in a secure location or with someone you trust to carry out your will.

Last Will of
[your name]
1. This is my Will. I revoke all prior Wills and codicils.

2. I nominate [name of person you want to be in charge of your estate] as my personal representative. If they do not serve, I nominate [name of alternate] to serve in their place.

3. I might prepare a separate written list of items of tangible personal property and designate who I want to receive such items. If I complete such a list, I give such items to the persons designated therein as the recipient of each such item.
This tangible property list is an optional document that is separate from your will; if signed, the list becomes incorporated into your will upon your death. It is a flexible option because if you change your mind about who you would like to receive a tangible item, you need not execute a whole new will, just update your list.

4. I give the balance of my assets as follows: Only chose one option
Option One: All to my surviving spouse; otherwise, to my descendants, by right of representation.
Option Two: All to my descendants, by right of representation.
Option Three: Equally to the following persons who survive me: [insert names of the beneficiaries of your estate]

Paragraphs 5 and 6 are only necessary if you have minor children
5. I nominate [name of person you want to be guardian of your minor children] as guardian of any minor children of mine. If they do not serve, I nominate [name of alternate] to serve in their place.

6. I nominate [name of person you want to be in charge your minor children's assets] as conservator of the estate of any minor children of mine. If they do not serve, I nominate [name of alternate] to serve in their place.

I execute this document as my Will on the _____ day of _______________, 20____, at _______________, Utah.

____________________
[Your Signature]

Unless your will is entirely handwritten, two adults who witnessed you sign your will must also sign.

Witnesses:

____________________
[Witness Signature]
[Witness Printed Name]

____________________
[Witness Signature]
[Witness Printed Name]

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Planning for the Transfer of Digital Assets on Death

The number, scope, and value of digital assets that individuals possess has increased dramatically in the past decade, raising the question of what happens to such assets when the owner dies or becomes incapacitated. Digital assets could theoretically have been dealt with under existing trust and estates law, but practically speaking, the privacy practices and terms of services agreements of digital asset "custodians" (Google, Facebook, etc.) made this impractical. For example, many such custodians' terms of services agreements have provided that a user's digital assets are non-transferable and that no successor had any rights of access upon death.

The Revised Uniform Fiduciary Access to Digital Assets Act attempts to address some of the unique attributes of digital assets while still adhering to the "traditional approach of trusts and estates law." The RUFADAA began to be enacted by states in 2016 and currently has been adopted by approximately 44 U.S. jurisdictions; in other words, it has been very well received since being proposed by the Uniform Law Commission. The RUFADAA establishes the rights of personal representatives, conservators, attorneys-in-fact, and trustees to access digital assets and communications of an individual.

Some digital asset custodians provide an online tool whereby a user can direct the custodian to disclose to a designated recipient the user's digital assets and/or communications; the RUFADAA confirms that such a designation by a user generally is enforceable and overrides contrary provisions found in the user's estate planning documents. However, not all custodians offer such a tool, and those that do may not offer complete access. For example, Facebook provides users the option to designate a "legacy contact" to look after their account on death, but such contact would have very limited access to the users account.

Fortunately, if a user has not utilized an online tool, they can allow fiduciary access to digital assets and/or communications in a will, trust, power of attorney, or "other record," including an electronic record. Such an instruction generally "overrides a contrary provision in a terms-of-service agreement," thus providing an alternative to a custodian's online tool that provides only limited access to a designated person. Anyone who is concerned about granting access to valuable or sentimental digital assets on death should consult with an estate planning attorney familiar with the RUFADAA.

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Creating Individual Inherited Retirement Accounts from a Trust Account

As I discussed in a previous post, a trust may be named as the beneficiary of a retirement plan upon the plan owner's death. There are complications and disadvantages of doing so, but there are potentially important reasons to name a trust as a retirement plan beneficiary. For example, naming a supplemental needs trust created for an individual with special needs as a retirement plan beneficiary, instead of the individual, will prevent the individual from ceasing to qualify for means-tested public assistance due to inheriting the retirement account.

Upon the termination of the trust that is the named beneficiary of a retirement account, any amounts remaining can be passed to the remainder beneficiaries of the trust intact, meaning in a manner that is not treated or reported as a taxable distribution from the retirement account. Instead, the transfer is treated as a plan-to-plan transfer to individual accounts established for the remainder beneficiaries of the trust.

In my experience, the custodian of the retirement account often requests a reference to legal authority that would allow the transfer of the retirement account from a trust account to separate account(s) in the individual name of the trust beneficiaries. IRS private letter ruling 200750019 is one such authority wherein the IRS permitted a trust that was a retirement plan beneficiary to be bypassed and separate, inherited IRA accounts established for the trust beneficiaries. While not binding, this ruling indicates that the IRS regularly permits this practice and can help assure a custodian that this practice is permissible.

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Fundamental Supplemental Needs Trust Planning

Careful planning is necessary for individuals who have heirs with special needs that qualify for means-tested public assistance. At a minimum, such a plan should include a trust that restricts distributions to any special-needs heir. Any distribution that would otherwise pass to such an heir can only be made for the heir's "supplemental needs," or those needs that are not provided by a government assistance program. This trust provision is necessary to prevent a special-needs heir on means-tested public assistance from ceasing to qualify for such assistance due receiving an inheritance.

Assets subject to a supplemental needs trust are not countable resources for purposes of determining the special-needs heir's qualification for means-tested public assistance. Accordingly, the heir can continue benefiting from their public assistance programs while maintaining the beneficial interest in a supplemental-needs trust. The trust is able to provide benefits that the heir is not already receiving from his or her public assistance program. A trust that is funded solely with assets derived from someone other than the special-needs heir is known as a third-party supplemental needs trust. After the termination of the trust, assets remaining in a third-party supplemental needs trust can be passed to other family members.

If proper planning is not undertaken and a special-needs heir does inherit assets, they have two primary options: Spend down all of the inheritance until the heir qualifies once again for the public assistance program(s), or transfer the inheritance into a first-party or self-settled supplemental needs trust. First-party supplemental needs trusts are funded with assets belonging to the individual with special needs. The key downside of a first-party supplemental needs trust is that upon the termination of the trust, the government must be reimbursed from any property remaining in the first-party trust up to the total amount of medical assistance benefits received by the beneficiary during their lifetime. Accordingly, it is much better if all family members from whom a special needs individual could possibly receive an inheritance complete an estate plan that includes supplemental needs planning provisions.

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Don't Subject Legal Services to Utah Sales Tax

A proposed bill in Utah, House Bill 441, would "[impose] a state sales and use tax on amounts paid or charged for services," among many other things. In the bill's current form, this would include a tax on legal services. This is not good public policy.

My practice focus on estate planning. I try to ensure that my bill for an estate plan for someone with limited means is as low as possible. While my fees are not inexpensive, they are lower than what most estate planning attorneys in Utah charge, and I provide far greater value than a general practitioner without a focus on estate planning might charge.

Many individuals still try to save money through a "do it yourself" estate plan or by hiring someone who charges less but has limited estate planning experience. I have many clients involved in estate disputes that arise due to an ineffectual estate plan; these disputes cost thousands of dollars and often could have been avoided if a good estate plan had been implemented in the first place.

A sales tax on legal services would increase the cost of those services, thereby leading more individuals to look for cheaper and less effective options. This would result in more estate disputes that would require significantly more in legal fees to resolve (which dispute fees would be subject to sales tax). Of course, the problems described herein apply not just to estate planning services but other legal services sought by vulnerable individuals such as those dealing with divorce, domestic violence, debt collection, personal injury, criminal charges, landlord problems, and bankruptcy. Please tell your legislator that you oppose a state sales tax on amounts charged for legal services.

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Estate Planning Fundamentals

Every estate plan should include a last will, power of attorney, and health care directive; additional benefits can be realized by including a revocable living trust. Each document serves a particular and important purpose that cannot be served by any of the other documents; these purposes are described below.

A last will and testament specifies who will receive and who will manage and distribute your assets upon your death. It also names a guardian for your minor children. If you pass away without a will, you are said to have died “intestate,” and the laws of the state will determine who receives your assets. In addition, since all minor children under 18 years of age must have a guardian, a guardian will be selected for your children through a judicial process if you pass away without a valid will.

A will does not allow your estate to avoid the probate process; it simply gives directions to the probate court, and a will must be probated in order to be effective. Probate is the legal process for establishing the validity of your will and transferring your “probate property” in accordance with your will. However, incorporating a revocable living trust into your estate plan can allow you estate to avoid the probate process and achieve additional planning objectives.

A revocable living trust is essentially a contract whereby you, as “grantor,” transfer your assets to a “trustee” with specific instructions contained in the trust agreement describing how the trust assets are to be managed. You will typically serve as the initial trustee of your revocable living trust as well as the grantor, meaning that you retain complete control over all of your assets while you are living. A trust can be an especially useful tool for reducing estate taxes that would otherwise be owed or establishing protective trusts for the benefit of your descendants upon your death.

When the grantor of a trust passes away, the successor trustee distributes the trust assets according to the instructions in the trust agreement. This is the mechanism for avoiding probate; the successor trustee legally takes over the management and distribution of your estate. Any property transferred to your revocable trust will avoid probate. Note that some assets pass by operation of law without the need for a trust or probate; these include property held in joint tenancy with rights of survivorship, retirement plans and life insurance policies that have a beneficiary designation, payable-on-death bank accounts, etc.

If you have a revocable living trust, you still require a last will and testament just in case an asset remains in your estate upon death. If your plan includes a trust, your will is often referred to as a “pour-over” will since it simply directs that all of your assets be “poured-over” into your trust to be disposed in accordance with its terms.

A durable power of attorney authorizes whoever is named in that document to act on your behalf to the extent authorized in the document. This document is effective if you are physically or mentally incapacitated, but ends upon your death; this allows another individual to manage your affairs during any time that you are unable. A power of attorney may be drafted so that it is effective from the moment it is signed, or may become effective only if you become incapacitated. After death, the successor trustee of your revocable living trust (or the personal representative named in your will if you do not have a living trust) will possess the powers of management and the right to distribute your assets to your beneficiaries.

An advance health care directive specifies your preference for health care treatment, such as whether life support systems should be continued if there is no hope of recovery. It also appoints someone else to make these decisions for you if ill health prevents you from being able to specify your own wishes. An estate plan may include any number of addition documents, but these are the basics.

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Planning with Multiple Person Accounts

There are many reasons why you might desire to involve someone else with your bank account. You may want to share ownership of the funds in the account. You may want another person to receive the funds in the account upon your death. You may simply want another person to have the ability to facilitate transactions without any ownership or survivorship rights. You may have more than one of these objectives. In order to create more predictability in light of each of these objectives, the Uniform Law Commission produced the Uniform Multiple Person Accounts Act, which has been adopted in many states.

There are three types of multiple-person accounts under the uniform law: joint accounts, pay-on-death accounts, and trust accounts. It is critical to understand the rights you are granting to another person by involving such person with each of these kinds of accounts. A trust account allows a person to serve in a trustee or agency role with respect to the funds without ever obtaining a beneficial interest. Funds remaining in a pay-on-death account on the death of the owner become the property of the pay-on-death beneficiary.


The key feature of a joint account is that while the funds "belong" to the contributor of the funds, any party to the account may unilaterally withdraw the funds in their entirety. The contributor may attempt to recoup funds that they contributed and which another party has wrongfully withdrawn, but this is a difficult and expensive process. Most people assume that the surviving owner of a joint account will necessarily own the remaining amounts in the account upon the death of the other owner, but technically, a joint account may or may not have these survivorship rights.

If your intent with respect to your account is both (1) that another person receive the remaining balance of the account upon your death and (2) that they also "own" the account during your life, then a joint account with right of survivorship makes sense. However, if you have objective (2) but not objective (1), you should ensure that the joint account has a pay-on-death option in lieu of a right of survivorship. On the other hand, if you have objective (1) but not objective (2), you should definitely not have a joint account, but rather a pay-on-death account.

If you have neither objective (1) nor objective (2), but rather simply desire that someone have the ability to facilitate transactions on the account, that person should simply be made trustee of a trust account of which you are the beneficiary. Better yet, a proper estate plan can also facilitate each of these objectives and provide many additional benefits as well.

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50 States' Disclaimer of Property Interests

A disclaimer is the refusal to accept the right to receive property. Disclaiming a property interest is an estate, gift, and generation-skipping tax avoidance technique allowed by Section 2518 of the Internal Revenue Code, and the right to disclaim is codified in each states' statutes. A disclaimer is also useful where a person simply does not want the property they would otherwise receive.

The Uniform Law Commission has completed a uniform Disclaimer of Property Interest Act that has been adopted by 20 jurisdictions; a prior version has been adopted by 11 jurisdictions. The American College of Trust and Estate Counsel has an old but somewhat useful summary of each states' law on this matter located here.

Below are current references to each states' property interest disclaimer statutes. This post will be updated as laws change; please comment below if you come across any incorrect or outdated information:

Alabama  Ala. Code § 43-8-290	Illinois  755 ILCS 5/2-7	Montana  §72-2-811, MCA	Rhode Island  R.I. Gen. Laws § 34-5-1
Alaska  A.S. § 13.70.010	Indiana  I.C. § 32-17.5-1-0.2	Nebraska  Neb. Rev. Stat. § 30-2352	South Carolina  S.C. Code § 62-2-801
Arizona  A.R.S. § 14-10001	Iowa  Iowa Code § 633E.1	Nevada  N.R.S. § 120.100	South Dakota  SDCL § 29A-2-801
Arkansas  Ark. Code § 28-2-201	Kansas  K.S.A. § 59-2291	New Hampshire  RSA § 563-B:1	Tennessee  T.C.A. § 31-1-103
California  Ca. Prob. Code § 260	Kentucky  KRS § 394.035  KRS § 394.610	New Jersey  N.J.S. § 3B:9-1	Texas  Tex. Prop. Code § 240.001
Colorado  C.R.S. § 15-11-1201	Louisiana  La. C.C. § 947	New Mexico  N.M.S. § 46-10-1	Utah  Utah Code § 75-2-801
Connecticut  Conn. Gen. Stat. § 45a-578	Maine  18-A M.R.S. § 2-801	New York  N.Y. Est. Powers and Trusts Law § 2-1.11	Vermont  14 V.S.A. § 1951
Delaware  12 Del. C. § 601	Maryland  Md. Code, ET § 9-216	North Carolina  N.C. Gen. Stat. § 31B-1	Virginia  Va. Code § 64.2-2600
District of Columbia  D.C. Code § 19-1501	Massachusetts  Mass. Gen. Laws ch. 190B, § 2-801	North Dakota  N.D.C.C. § 30.1-10.1-01	Washington  RCW § 11.86.011
Florida  Fla. Stat. § 739.101	Michigan  M.C.L. § 700.2901	Ohio  R.C. § 5815.36	West Virginia  W. Va. Code § 42-6-1
Georgia  O.C.G.A. § 53-1-20	Minnesota  Minn. Stat. § 524.2-1101	Oklahoma  Okla. Stat. tit. 60, § 751  Okla. Stat. tit. 84, § 22	Wisconsin  Wis. Stat. § 854.13
Hawaii  H.R.S. § 526-1	Mississippi  Miss. Code § 89-21-1	Oregon  O.R.S. § 105.623	Wyoming  W.S. § 2-1-401
Idaho  Idaho Code §15-2-801	Missouri  §469.010, RSMo	Pennsylvania  20 Pa.C.S. § 6201

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