One of the most important things you can do for yourself and your family is to have a will. It spells out precisely how you want things to be handled, and protects your spouse, children, and any beneficiaries. As everyone’s situation is different, an experienced attorney at Hepworth Legal can help to properly prepare a will that effectively and efficiently manages how your estate is handled. After you pass on, your will governs the following:

• How your estate should be distributed
• If necessary who takes care of your minor children
• Avoids the long probate process
• Minimizes estate taxes
• Directs the awards of gifts and donations
• You determine who settles your financial matters
• It can be changed if and when you choose

There are both advantages and disadvantages to Wills and Trusts. In a Will, a settlor can specify the items above and even outline funeral arrangements. Whereas a trust can help make plans in the event of a disability and does not pass through probate. A will goes into effect only after your passing, a trust is in effect when it is created. Every situation deserves a custom solution, so the professionals at Hepworth Legal work to understand your specific needs and utilize the best tools to handle your estate plan.

Our expert attorneys consult with you to help determine the best approach to your desired result. Below is an overview of several types of trusts commonly used in Utah:

A revocable trust is a common trust used to avoid probate, however, it does not provide protection from creditors. Because a revocable trust is revocable and amendable by the person who created and funded the trust, that person’s creditors can reach the trust assets just as they could reach assets that are owned individually.

An irrevocable trust that is created by someone other than a trust beneficiary can provide asset protection from the beneficiary’s creditors. If the trust requires that all distributions from the trust be in the trustee’s discretion, then property that is held in an irrevocable trust can be reached by the beneficiary’s creditors only after it has been distributed to the beneficiary.

An irrevocable trust of which the person who created and funded the trust is also a beneficiary offers relatively little protection from his or her creditors. The creditors can generally reach the maximum amount of the trust’s assets that could be distributed to the debtor.

Utah’s Domestic Asset Protection Trust statute allows a person to create and fund an irrevocable trust with their own assets. So long as the statute requirements are satisfied, future creditors will not be able to reach trust property, will not be able to force distributions, and will not be able to require the trustees to pay the creditor directly. A creditor can reach assets only after the distribution has been made to the debtor individually.

A self-settled asset protection trust must have at least one trustee who is a Utah resident or company. The creator of the trust may serve as a co-trustee, but may not participate in distribution decisions.

A self-settled asset protection trust does not protect property transferred to the trust with the intent to defraud a creditor. A creditor who exists at the time the trust may bring an action to enforce a claim within the later of two years after the property is transferred or one year after the creditor could have reasonably discovered the transfer. Although, the creator of the trust may shorten this period to 120 days by sending notice to known creditors and publishing notice in a newspaper in the county where the creator lives.

Revocable vs. Irrevocable Trusts: Key Differences

Estate planning often involves discussion of revocable and irrevocable trusts, but what is the difference between the two? As their names suggest, it comes down to whether or not the trusts can be changed or revoked after being created.

Revocable Living Trusts

A revocable living trust is a trust where the person creating it (the grantor) retains full control over the assets during their lifetime. The terms of a revocable trust can be changed or amended at any time if circumstances or asset levels change. Upon the grantor’s death, the trust assets pass directly to the named beneficiaries, avoiding probate.

Some key features of revocable trusts:

• Assets remain under grantor’s control
• Can be modified or revoked at any time
• Terminates upon grantor’s death
• Avoids probate but does not shelter assets from estate taxes
• For most people, the main advantages of a revocable trust are privacy and streamlined asset distribution through probate avoidance. The grantor retains flexibility.

Irrevocable Trusts

In contrast, an irrevocable trust cannot be changed or revoked once properly executed. The grantor effectively surrenders complete control over all assets placed inside the trust.

Some common reasons for establishing irrevocable trusts include:

• Removing assets from taxable estate
• Protecting assets from creditors/lawsuits
• Qualifying for government benefits like Medicaid
• Supporting charities and causes long-term

The rigidity of an irrevocable trust can provide benefits like tax minimization and asset protection that revocable trusts do not offer. However, the lack of control also means extreme care should be taken in drafting an irrevocable trust’s provisions.