Utah's New Uniform Power of Attorney Act

Utah's new Uniform Power of Attorney Act went into effect on May 10, 2016. A power of attorney is a document with which an individual, known as the principal, grants authority to an agent to act in his or her place and is an important component of an estate plan.

One the most notable features of the new act compared to Utah's old act is that the new act provides an optional statutory power of attorney form, located here. Even though a power of attorney is valid even if it does not conform to the statutory form, the statutory form will likely become the standard form in Utah and for that reason, may attorneys will likely adopt some version of the statutory form.

Existing powers of attorney are still valid under the new act, assuming they were valid under the old act, and they may actually be more effective now than under the old act. This is because under the new act, a third party must generally either accept an acknowledged power of attorney or request a certification or an opinion of counsel regarding the power of attorney. As long as the certification or opinion is provided, the third party is generally liable for refusing to accept the power of attorney. A statutory form certification is part of the new act. In other words, there is less opportunity for a third party to reject a power of attorney under the new act as there was under the old act, an issue I discussed in a prior post.

On the other hand, existing powers of attorney may no longer be sufficient to grant the agent the same powers that the agent would have had under the old act. This is because under the new act, an agent can take certain actions on behalf of the principal only if the power of attorney expressly grants the agent that authority. For example, the power to make gifts on behalf of an incapacitated principal is occasionally useful as an estate tax reduction strategy, but any existing power of attorney that doesn't specifically grant this power will not be effective in giving that authority to the agent.

The new act provides a good opportunity for Utahans to pull our their estate planning documents and consider whether their existing power of attorney is appropriate for their needs. A well-drafted power of attorney will provide peace of mind and pay for itself many times over if it negates the need for a conservatorship or prevents waste of an incapacitated principal's assets.

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IRS Imposter Phone Scam

I've been contacted multiple times in the past few months by individuals who have received calls from someone purporting to be with the IRS and demanding immediate payment of an outstanding tax liability. Such phone calls are scams, and have been occurring for years. Based on my recent experience and information published by U.S. government agencies, I'm offering the following ways to recognize these phone scams:

• The caller says they are from the IRS or Treasury Department and demands payment of a tax bill over the phone immediately. 
• The IRS will never call to demand immediate payment over the phone. 
• The caller demands payment via a prepaid debit card, a money order, or a wire transfer.
• The IRS will never call and ask for credit card numbers or bank information over the phone. The IRS does not need this information; any taxpayer can initiate a payment to the IRS for any federal tax at any time using the EFTPS System.
• The caller threatens those who don't pay with criminal charges, a grand jury indictment, immediate arrest, deportation, or loss of a passport or driver’s license.
• The IRS will never take or threaten to take any of these actions if payment is not made during the course of a phone call. Certainly, criminal penalties are possible in certain circumstances, but not before due process. As IRS Commissioner John Koskinen put it, "If you are surprised to be hearing from us, then you're not hearing from us."

The IRS will always send notices and bills in the mail and follow their standard collection and appeals process, which I described in a previous post. If you do receive a call from an individual claiming to be with the IRS and demanding money immediately, hang up the phone. The Treasury Inspector General for Tax Administration has an online form that can be filled out to report the scam.

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Bequests to Charity and Tax Apportionment

Many individuals wish to leave a specific amount of money or particular property to their heirs and the rest of their estate to charity. While this seems straightforward, administering this plan can become complicated when the estate is subject to the estate tax.

The reason is explained in Treas. Reg. § 20.2055-3(a)(1): "If a residuary estate... is bequeathed to charity, and by the local law the Federal estate tax is payable out of the residuary estate, the deduction may not exceed that portion of the residuary estate bequeathed to charity as reduced by the Federal estate tax... [T]he resultant decrease in the amount passing to charity will further reduce the allowable deduction."

Stated differently, the estate tax deduction is based on the amount actually available for charitable uses, which amount is reduced by estate taxes. This "results in a circular, or interrelated, computation because the reduction in the charitable deduction in turn increases the taxes payable that again reduces the charitable deduction and so forth. The calculation must be run until the additional taxes zero out."

This problem can be avoided through careful drafting by either "structuring the charitable bequest as a pre-residuary rather than a residuary bequest" or not allowing for the apportionment of the estate tax on any property set aside for charity. Under the Uniform Estate Tax Apportionment Act, which has been adopted by a handful of states, "charitable beneficiaries generally are insulated from bearing any of the estate tax;" however, this is generally overridden by a tax apportionment clause in a will or trust. Every client must understand their options for apportioning estate taxes (not to mention other inheritance taxes) and the impact the apportionment will have on their distribution scheme.

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Methods of Estate Distribution

Estates that are left to a decedent's descendants, whether by will, trust, or statute, use one of three primary methods of distribution: (1) Per stirpes or right of representation, (2) the pre-1990 Uniform Probate Code method, which is known by various names, and (3) the current Uniform Probate Code method or per capita at each generation.

The three methods result in different distributions only where multiple descendants with issue predecease a decedent. In order to illustrate these differences, I've prepared the following charts to illustrate all possible scenarios involving an individual with three children, A, B, and C. Child A has 3 children, U, V, and W; child B has 1 child, X, and child C has 2 children, Y and Z. This is the example given in the comments to the Uniform Probate Code, and I'll assume the decedent passed away with an estate worth $720. The first table illustrates respective inheritances if all children survive, with each method reaching the same result:

	Per Stirpes	Pre-1990 UPC	Current UPC
A	240	240	240
u/v/w	0	0	0
B	240	240	240
x	0	0	0
C	240	240	240
y/z	0	0	0

The next table illustrates respective inheritances if one child predeceases the decedent. Children who have predeceased the decedent are in [brackets].  Note that the figures in the boxes for grandchildren is the amount of inheritance per grandchild. Again, each method reaches the same result.

	Per Stirpes	Pre-1990 UPC	Current UPC
[A]	0	0	0
u/v/w	80	80	80
B	240	240	240
x	0	0	0
C	240	240	240
y/z	0	0	0
A	240	240	240
u/v/w	0	0	0
[B]	0	0	0
x	240	240	240
C	240	240	240
y/z	0	0	0
A	240	240	240
u/v/w	0	0	0
B	240	240	240
x	0	0	0
[C]	0	0	0
y/z	120	120	120

The next table illustrates respective distributions where all children predecease the decedent. The pre-1990 UPC and current UPC methods reach the same result: All grandchildren are treated equally. The per stirpes method divides what a grandchild's parent would have received among the grandchild's siblings, thereby reaching a different result.

	Per Stirpes	Pre-1990 UPC	Current UPC
[A]	0	0	0
u/v/w	80	120	120
[B]	0	0	0
x	240	120	120
[C]	0	0	0
y/z	120	120	120

Finally, I have illustrated the different scenarios where multiple children, but not all, predecease the decedent. The per stirpes and pre-1990 UPC methods reach the same result. Again, figures in the boxes for grandchildren are the distribution amount per grandchild:

	Per Stirpes	Pre-1990 UPC	Current UPC
[A]	0	0	0
u/v/w	80	80	120
[B]	0	0	0
x	240	240	120
C	240	240	240
y/z	0	0	0
[A]	0	0	0
u/v/w	80	80	96
B	240	240	240
x	0	0	0
[C]	0	0	0
y/z	120	120	96
A	240	240	240
u/v/w	0	0	0
[B]	0	0	0
x	240	240	160
[C]	0	0	0
y/z	120	120	160

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50 States' Charitable Solicitation Registration Search

In a previous post, I discussed the various laws requiring nonprofit organizations wishing to solicit donations from the public to register with the state. Nearly all states that require charitable solicitation registration make registered organizations' information available to the public. In this post, I've collected links to each states' webpage for searching for charities that have qualified to solicit contributions within the state.

In utilizing these state databases, it is important to keep in mind that the standard for registering is different in every state. Texas, for example, does not require charities or non-profit organizations to register unless they solicit for law enforcement, public safety, or veterans causes. Other states, such as Louisiana, only require registration of paid fundraisers or charities that contract with paid fundraisers from outside of the organization.

This post will be updated as necessary; please comment below if you come across broken links or updated resources:

Alabama*	Illinois	Montana^	Rhode Island
Alaska	Indiana^	Nebraska^	South Carolina
Arizona^	Iowa^	Nevada	South Dakota^
Arkansas	Kansas	New Hampshire	Tennessee
California	Kentucky	New Jersey	Texas
Colorado	Louisiana*	New Mexico	Utah
Connecticut	Maine	New York	Vermont^
Delaware^	Maryland	North Carolina	Virginia
District of Columbia	Massachusetts	North Dakota	Washington
Florida	Michigan	Ohio	West Virginia
Georgia	Minnesota	Oklahoma	Wisconsin
Hawaii	Mississippi	Oregon	Wyoming^
Idaho^	Missouri	Pennsylvania

*Registration required, no online search available
^No registration required

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Uniform Voidable Transactions Act

The Uniform Voidable Transactions Act (UVTA), known as the Uniform Fraudulent Transfer Act (UFTA) until 2014, is a uniform law providing remedies to creditors for certain debtor transactions that are deemed unfair. The UFTA was adopted by 46 jurisdictions, while the UVTA has currently been adopted in nine states. However, the UVTA is not substantially different from the UFTA, meaning that the vast majority of states have very similar statutes on the subject.

The full text of the final version of the UVTA is located here. Following is a conceptual questionnaire to assist in determining whether a transaction is voidable under the UVTA:

1. Was a transfer made (or obligation incurred) by a debtor?
       a. Yes - Go to Question 2.
       b. No - STOP; no voidable transaction.
2. Was the transfer made with actual intent to hinder, delay, or defraud any creditor? See eleven factor test in UVTA section 4(b).
       a. Yes - STOP; transaction is voidable.
       b. No - Go to Question 3.
3. Was the transfer made (i) after a creditor claim arose (ii) to an insider (iii) for an antecedent debt (iv) when the debtor was insolvent and (v) where the insider had reasonable cause to believe that the debtor was insolvent?
       a. Yes - STOP; transaction is voidable.
       b. No - Go to Question 4.
4. Was the transfer made without receiving a reasonably equivalent value in exchange?
       a. Yes - Go to Question 5.
       b. No - STOP; no voidable transaction.
5. Was the transfer made (i) after a creditor claim and (ii) at a time the debtor was insolvent or the debtor became insolvent as a result of the transfer?
       a. Yes - STOP; transaction is voidable.
       b. No - Go to question 6.
6. Was the debtor engaged in or about to engage in a transaction for which its remaining assets were unreasonably small in relation to the transaction or (ii) intending to incur, or believing or reasonably should have been believing that it would incur debts beyond the its ability to pay as they became due?
       a. Yes - STOP; transaction is voidable.
       b. No - STOP; no voidable transaction.

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Charitable Solicitation Registration

Nearly every state requires charitable organizations that solicit money to register before fundraising. Often, there are exceptions to registration, such as a church soliciting from its membership or organizations that are regulated under other laws such as political action committees. Otherwise, however, the definition of "soliciting" is very broad and could arguably include simply maintaining a website requesting donations, depending on the state.

Additional registration requirements often apply to professional fundraisers, fundraising counsel, and commercial co-ventures. For an excellent summary of these laws in all U.S. jurisdictions, see State Charitable Solicitation Registration Requirements by Asiatico & Associates, PLLC.

Fortunately, a charitable organization that intends to engage in a nationwide fundraising campaign can register in most jurisdictions using a single form, thanks to the Unified Registration Statement, or URS. The URS is available as an alternative to filing the state-specific form in each participating jurisdiction; thus, a nonprofit may use either the state form or the URS in most registration states.

According to the URS website, 37 jurisdictions currently accept the URS (although Arizona's registration law was recently repealed), with 14 of those requiring a state-specific supplemental form. Colorado, Florida, and Oklahoma, and most recently Nevada, require charitable solicitation registration but do not accept the URS. Nevada is not currently listed on the URS website and others as a state that requires charitable solicitation because the requirement is so recent, becoming effective January 1, 2014. Be sure to check state law before soliciting for your charity!

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