Asset Protection Trusts in Utah: What’s Best for Me?

You may have heard about families or individuals in Utah who lost their wealth or their home due to a lawsuit or creditors. The effects of such situations can be devastating, and perhaps they’ve caused you to reflect on ways you can better protect your own assets.

To protect your home or other important assets, the best solution is an Asset Protection Trust. Not all trusts are the same, and that is also true for Asset Protection Trusts. We’ve outlined information that can help you understand more about Asset Protection Trusts in Utah and your options for establishing one:

Asset Protection Trusts Are Irrevocable (and That’s Okay)

Trusts are either revocable or irrevocable. A revocable trust is one where the Settlor (also called a Grantor or Trustor) retains powers to amend or revoke the trust. This is the most common type of trust people create for estate planning. 

An irrevocable trust is one where the Settlor does NOT retain powers to revoke or amend the trust. But this doesn’t mean that the trust cannot be modified, it just means some other mechanism is required to add flexibility to the trust. Asset protection is one of many reasons to create an irrevocable trust. When prepared properly, creditors cannot reach into the trust AND you maintain broad flexibility. 

What Is an Asset Protection Trust?

An Asset Protection Trust is an irrevocable trust established for estate planning and to protect trust assets from personal liabilities and helps influence outcomes in settlement negotiations. 

The goal of a properly prepared Asset Protection Trust is to allow the beneficiary access to the assets and funds while keeping creditors out. The most important rule of asset protection is, “If you do not own it, it cannot be taken away from you.” Timing is also crucial. Assets must be transferred to the Asset Protection Trust in advance of creditor problems. If you already have a pending claim, it’s too late. 

As the Settlor of the trust, you get to choose the beneficiaries; these can be your spouse, your children, another appointed individual, and in some cases even yourself. Successful asset protection will protect your assets against lawsuits, bankruptcies, IRS audits, and other creditors.

Your situation and assets are unique, and your Asset Protection Trust should be individually tailored to suit your needs. The following two types of Asset Protection Trust fit most needs and both can be specifically tailored to you. 

Utah Domestic Asset Protection Trust (UDAPT)

A Utah Domestic Asset Protection Trust (UDAPT) is a self-settled spendthrift trust. Self-settled means that you are the beneficiary of a trust which you created and funded. Generations of laws previously stated that your creditor can get access assets in your trust to the extent that you’re a beneficiary. 

Utah is one of a minority of US States that turned the tables allowing creditor protection for a self-settled trust (a trust whose settlor is also a permissible beneficiary). UDAPTs work well in many situations, and have many advantages as well as possible disadvantages. It is advisable to consult your attorney before deciding on this as your choice of asset protection.

541 TrustⓇ 

A 541 TrustⓇ is a third-party irrevocable trust (non-self-settled) meaning that it is established by the Settlor and names individuals other than themself as the beneficiaries. This type of trust works in all 50 States and under the Federal Bankruptcy Code. A 541 TrustⓇ allows the Settlor enormous flexibility to change the terms of the trust while maintaining maximum asset protection. It is simple to understand, modify, and even unwind. 

There are many ways to protect your assets. At McCullough Sparks, we work to tailor a unique strategy that suits you and your assets. We specialize in creating customized plans and flexible irrevocable trusts. Protect your assets for you and your future generations by contacting us today. 

Tips Series: Asset Protection Tips for Your Home

Your primary residence is likely one of your most essential assets. The safety, sense of family togetherness, security, and community provided by your home makes it your most treasured belonging.

Protecting your home provides significant peace of mind. Without asset protection, you could become the victim of a lawsuit or experience an unexpected loss of your home.

We’ve put together a list of good, better, and best tips for asset protection when it comes to your residence:

1. A Good Idea: Invest in Insurance

You should definitely have general homeowner’s liability insurance. Additionally, you should consider an umbrella policy. Umbrella liability coverage refers to coverage that protects beyond the existing coverage and limits of other policies. This personal liability insurance covers injuries to other people that occur in your home. It also protects the damage caused to their belongings while in your primary residence.

For instance, if your neighbor is over and trips on a toy left on the ground, they may be unable to work for some time, making you responsible for compensation for their injury. While the liability limits in your home insurance coverage may not be enough to cover the medical expenses, umbrella liability insurance can protect you from these additional costs. We recommend that everyone consider an umbrella policy because it provides additional protection and is relatively inexpensive. That said, insurance doesn’t offer full asset protection for your home.

2. A Better Idea: Transfer Ownership to Lower Your Risk

One of the fundamental rules of asset protection is, in the words of John D. Rockefeller, “Own nothing, but control everything.” If married, placing your home under the name of the less-at-risk spouse can keep your home safer from your individual liability exposure. Even better, separate revocable trusts are beneficial to married couples in terms of separating ownership while incorporating estate planning benefits.

For instance, if you are at a high risk of facing a lawsuit due to your profession, you should consider transferring the ownership of your home to your less risky spouse (or the less risky spouse’s trust). When done right, this ensures full protection from the creditors of the spouse at risk. It’s important to keep in mind, however, that this strategy has limitations and may fail if the less-at-risk spouse incurs a liability, is sued, etc.

3. The Best Idea: Get an Asset Protection Trust

The best option to provide reliable protection to your home is to seek the help of an attorney to prepare an effective Asset Protection Trust. This trust protects your home from creditors and involves transferring the asset to a trustee to manage it on your behalf. Since your home is under the ownership of someone else, your creditors cannot seize the asset. This goes back to that fundamental rule—own nothing, control everything.

It’s critical to make sure you seek asset protection services from a law firm that you trust, as well as invest in an Asset Protection Trust that corresponds to your asset protection needs and is relevant to your situation. Asset Protection Trusts are a good option for most. When done properly, they are simple and protect your assets from potential liability. You should also remember to transfer these assets in advance of a creditor problem.

Two types of asset protection trusts:

    1. Domestic Asset Protection Trust (DAPT):A Domestic Asset Protection Trust is an irrevocable trust where the person who establishes the trust (the Settlor) is an eligible beneficiary. This is often called a Self-settled Spendthrift Trust. It is a relatively new strategy and works in specific circumstances and is only permitted in a handful of US States. When this trust is appropriate, it works very well and can be flexible.Here are the states that currently permit DAPTs:
      • Alaska
      • Delaware
      • Hawaii
      • Michigan
      • Mississippi
      • Missouri
      • Nevada
      • New Hampshire
      • Ohio
      • Oklahoma
      • Rhode Island
      • South Dakota
      • Tennessee
      • Utah
      • Virginia
      • West Virginia
      • Wyoming

       

    2. 541 TrustⓇ: A 541 Trust is an irrevocable trust where the Settlor establishes and funds the trust and names another as the beneficiary (e.g. Settlor establishes the trust for spouse and descendants). This strategy works in all 50 states and provides the best protection for your home. It is easy to understand, operate, modify, or even unwind. More than 200 years of court cases and statutes support this strategy

    Keep Your Home Safe with Asset Protection

    It is important to stay informed and aware of the risk that your primary residence faces as an asset. Understanding that risk can help you decide on the best asset protection strategies that suit your specific needs. Taking simple steps now can protect you from potential future creditor attacks.

    Looking for more information? Reach out to our asset protection attorneys today and choose a trust that best works for you.

Planning for a Crisis

Planning for a Crisis

The world around us is constantly changing and evolving. During times like these, we want you to have peace of mind knowing, with certainty, that your assets are secure and your estate plan is set.

To know if you are ready for a potential crisis you can ask yourself the following preliminary questions:

1)      Do I have control over my assets and how they’re protected?

2)      Do I have the legal documents I need so that my family is able to care for my needs?

3)      Is my family financially cared for if a crisis occurs?

These questions are simple starting points for what you and your family should be planning for prior to a crisis situation.

For a more in-depth analysis, consider the following:

Inventory of Assets

An inventory of your assets could look like you gathering a pen and paper and writing down every asset you own. We recommend gathering bank and investment statements, tax property notices, and life insurance policy information. This will ensure you know what you have and what you need to protect.

Protecting My Assets

When crises hit, panic can often follow. In the midst of panic, third parties may try to make claims against your and your assets. Most people only remember to think of protecting assets when they’re past the point of allowable protection. Think smart — plan ahead and protect those you care about by protecting the means and assets by which you can care for them.

Necessary Legal Documents

Financial and Healthcare Powers of Attorney are essential in preparing for a crisis. These legal documents allow trusted individuals (called “agents”) to make financial and health care decisions for you when you are unable to do so. These financial decisions can include filing taxes, paying bills, dealing with insurance, and contacting financial institutions on your behalf. Healthcare decisions can include authorizing emergency care procedures and physical therapy, signing healthcare releases, and making other healthcare decisions on your behalf. These documents work together to ensure your finances and health care are taken care of.

Caring For My Family Financially

You can prepare for your family’s future by ensuring you have the following: adequate health insurance, a good cash reserve, a working budget, and auto-payments in place. Furthermore, protecting assets, as mentioned above, and/or planning for death will help to secure your family’s future

By having McCullough Sparks provide your estate planning and asset protection, you can have peace of mind even during times of uncertainty.

Contact us today

for a free consultation about your financial protection for a free consultation about your financial protection

Who Needs an Estate Plan

Who Needs An Estate Plan?

If you own a home, have kids, want your kids to be taken care of, or just want a bit more peace of mind, get an estate plan today!

Avoiding Probate

Probate is a process every state has that validates Wills when someone passes away. Probate is expensive and scary for some—and for good reason. Knowing that your family members have to go through this sometimes expensive and lengthy process might make passing away more scary than in needs to be. Having a fully funded Trust allows you and your loved ones to stay out of the court system and mourn smoother than without a fully funded Trust.

If you own a home (a.k.a. real estate), your estate automatically goes through probate without a fully funded trust. If you only have a Will, your estate automatically goes through probate as well.

Controlling Inheritance

Concerned about your children or heirs receiving a lump sum of money after you pass away? A fully funded trust gives you the power to choose when, how, and how much your heirs receive. An added bonus: creditors aren’t allowed to reach your heirs’ inheritance share if you draft your trust just right.

Choosing Agents

Our estate planning packages include a Financial Power of Attorney and a Healthcare Directive. If you want to choose a list of loved ones to take care of your financial matters and make healthcare decisions in the event of your incapacitation, you need an estate plan.

Planning for Estate Taxes

If you want to avoid that pesky estate tax, estate planning can take care of it! Although the threshold is currently about $11 million per person, your wealth may change or the threshold could decrease.

Fully Funded—What Does That Mean?

A trust is useless if all of your assets lack the proper title. For example, having a well-drafted and strong trust document won’t do any good for your property if the deed to your house isn’t put into your trust name. Bank accounts, life insurance policies, stock, business interest, and sometimes IRAs are put into trusts. If any of your assets are missing, it’s not fully funded. A firm like ours includes funding trusts as part of our full estate planning packages.

So whichever motive resonates the most with you, meet with one of our attorneys and get your estate in order today!

Estate Planning That Everyone Needs

Everyone needs some sort of estate planning, regardless of the above reasons. Here are some estate planning documents that everyone needs:

  • Revocable Trust (Joint or Separate). This type of trust holds primary assets like a residence, bank or investment accounts, life insurance, and other assets so that after your death, successor trustees can ensure that all assets are responsibly administered for your beneficiaries. An added bonus: this type of planning avoids the need for complex probate after your death. You and your spouse, if applicable, are the trustees of this trust during your lifetimes and you can choose reliable people to be successor trustees once you pass away. 

  • Pour-over Will. A will is a good option, but a pour-over will allows any assets that were not already in your trust to be poured into the trust upon your death. Your will also identifies the guardians to any minor children.

  • Durable Financial Power of Attorney. This document grants authority to a trusted person (usually a spouse or a parent) to sign documents on your behalf for assets not in the trust such as cars, checking accounts, tax returns, etc. 

  • Health Care Directive. This document grants authority to a trusted person to make medical decisions for you if you cannot for yourself. The possibility of a coma or incapacitation applies to everyone. You indicate your wishes for end of life care (e.g. wishes for life support or resuscitation).

Contact us today

for a free consultation about your financial protection for a free consultation about your financial protection

Utah Domestic Asset Protection Trust – The Good, the Bad, and The Better

What is a Utah Domestic Asset Protection Trust (UDAPT)?

  A UDAPT is an irrevocable trust that provides (1) asset protection, (2) control, (3) and access. Hundreds of years of laws previously stated that your creditor can get access assets in your trust to the extent that you can benefit from them. Utah is one of 17 US States that turned the tables allowing creditor protection for a self-settled trust (a trust whose settlor is also a permissible beneficiary).

Who should consider a UDAPT?

  People with high-liability professions, high net-worth, or high-risk aversion who want to take some “chips” off the table and also be a permissible beneficiary. People who want to protect assets such as a residence or other real estate, savings or investment accounts, business interests, or other valuable assets should consider a UDAPT in their asset protection plan.

Pros and Cons of a UDAPT?

Pros:

  • Statutory – Blessed by Utah Statutes.
  • Control – The Settlor can control the trust assets and investments (however another non-beneficiary co-trustee is required to make distribution decisions).
  • Access – The Settlor is a permissible beneficiary.
  • Statute of Limitations
    • Non-existing Creditors (Potential Future Creditors): Immediate protection
    • Existing Creditors: Barred from making a claim after the later of 2 years or 1 year after they reasonably should have known about the transfer to the trust. This can be reduced to 120 Days by providing actual notice to known creditors and by publishing notice for unknown creditors.

 Cons:

  • Affidavit of Solvency – A strict interpretation of the UDAPT statute appears that every time you make a transfer into the trust, you must sign an affidavit of solvency. If this isn’t followed for each transfer, a potential creditor could attempt to attack the trust on the grounds that the formalities had not been followed (although there are no court cases on this).
  • New Law – Only 17 States allow DAPTs. Utah has only allowed the use of a DAPT since 2013. Alaska was the first state and has only allowed this type of trust since 1997. There are very few court cases addressing their effectiveness.
  • Liabilities in other States – There is concern that the trust assets are vulnerable to creditors outside of Utah without DAPT statutes.
  • Real Estate – Utah requires that deeds to real estate transferred to a UDAPT state that the trust is an “asset protection trust.” This requirement appears in a different part of the Utah statutes (not the UDAPT statute) and is often missed. Some have concerns about whether they lose the protection if they don’t do this. Some prefer not to put the words within an “asset protection trust” on a publicly recorded document.
  • Bankruptcy – Federal bankruptcy can reach assets transferred into the trust within 10 years of the bankruptcy. 

How to set up a UDAPT?

  The UDAPT requires specific language and should be prepared by an attorney with extensive knowledge about Utah estate planning and asset protection. At least one trustee of your DAPT must be a Utah resident. The Settlor must sign an Affidavit of Solvency each time assets are transferred into the trust, which means you are certifying that after the transfer of every asset into your DAPT, you still have more assets than liabilities and can cover your obligations.

 When to create an Asset Protection Trust?

  Timing is important with any asset protection. The trust should be established in advance of a creditor problem to avoid fraudulent/voidable transfers (transfers which render the settlor insolvent or are made with the intent to delay, hinder, or defraud known creditors). Any asset protection strategies should be established before the liability wind is blowing so that if the storm comes, you already have a bunker prepared.

Building a Better UDAPT

  McCullough Sparks has 30 years of combined experience in creating irrevocable trusts. Understanding a client’s particular situation is key in determining what tools to use. A UDAPT can be created with variations and provisions to provide greater protection and flexibility. This could include (1) appointing a Trust Protector who can remove and replace trustees among other things, (2) limiting the settlor’s beneficial interests (such as to reside in trust owned real estate, if the settlor doesn’t need distributions, or the trust only owns a residence), (3) asset protection planning with more than one trust, and (4) publishing notice (or providing specific notice to creditors) to shorten the statute of limitations period to 120 days.

What is better than a UDAPT?

In many circumstances, a third-party trust (non-self-settled) is a better planning tool. We call our third-party trust a 541 Trust®. A 541 Trust® works in all 50 States. We always consider your specific circumstances when determining which type of asset protection trust is best for you. Asset protection plans require customization by a knowledgeable attorney.

 

  A UDAPT is a good option if the settlor lives in Utah, the assets the settlor needs protecting are in Utah (or in another DAPT State), and the settlor doesn’t have a likelihood of bankruptcy within 10 years of funding the trust. UDAPTs often work well for unmarried individuals with assets in need of protection. If, however, the settlor has assets or liability exposure in many states other than Utah, a 541 Trust® may be a better solution. 

U.S. Supreme Court Ruling Enhances Support for saving state income tax with ING Trusts (NINGs, DINGs, WINGs etc.)(North Carolina Department Of Revenue V. Kimberley Rice Kaestner 1992 Family Trust)

On July 21, 2019 the U.S. Supreme Court ruled unanimously that North Carolina could not tax the income of a New York trust where the only connection to North Carolina was a discretionary beneficiary who had not received and could not demand distributions. While the court’s opinion was applied narrowly to the facts, it provides support for planning with trusts to avoid or defer state income tax such as NINGs.

FACTS OF THE CASE

Decades ago, a father established a trust for the benefit of his children in New York. Some time later, the trust was subdivided into separate trusts, one for the benefit of his daughter Kimberley and her children and called the trust The Kimberley Rice Kaestner 1992 Family Trust (the “Kaestner Trust”). Kimberly moved to North Carolina at some point.

The North Carolina Department of Revenue assessed a $1.3 million tax for 2005-2008 because The Kaestner Trust was “for the benefit of” a North Carolina resident. The taxing authority relied on North Carolina statutes and a North Carolina Supreme Court case which found that a beneficiary residing in the state was sufficient to assess the tax. The Trustee paid the tax then appealed in the North Carolina courts. The appeal claimed that the Due Process Clause of the U.S. Constitution prevents North Carolina from assessing a tax where the only link to North Carolina was that a beneficiary resided in the state. All of the North Carolina courts agreed, holding “that the Kaestners’ in-state residence was too tenuous a link between the State and the Trust to support the tax.” The North Carolina Department of Revenue appealed to the U.S. Supreme Court.

The North Carolina Department of Revenue’s argument failed again at the highest court in the land. The State argued that a “trust and its constituents” (e.g. a trustee or beneficiary) are “inextricably intertwined,” and supports state taxation, and an in-state beneficiary is sufficient to tax the trust. The court acknowledged that while a beneficiary is central to a trust, there is such “wide variation in beneficiaries’ interests” in any trust and wouldn’t adopt such a hard-line rule to tax solely on that basis. Likewise, the State’s arguments that ruling in favor of the Trust would “undermine numerous state tax regimes” and could “lead to opportunistic gaming of state tax systems” failed.

The US Supreme Court considered the Due Process Clause of the U.S. Constitution. Ultimately, a minimum connection between the State and the trust is required to assess a tax. It was a purely discretionary trust. Distributions to or for the benefit of a beneficiary were in the sole discretion of a Trustee who was not in the State of North Carolina. The ruling was that the mere residence of the beneficiary in North Carolina was not sufficient to tax the trust because: 1. The beneficiary did not receive any income from the trust during the years in question, 2. The beneficiary had no right to demand trust income or to control, possess, enjoy, or receive trust assets, and 3, The beneficiary couldn’t count on receiving distributions from the trust at any known point in the future.

ANALYSIS

What does this case tell us? Although the ruling was limited to the narrow facts of this case, it gives us an excellent view of how the U.S. Supreme Court interprets States’ authority to tax trusts. It supports the idea that a trust can be established in another state and avoid/defer income tax in the state of the trust beneficiary. Establishing a non-grantor trust (a trust which is a separate income tax payer) in a state without state income tax (sometimes called ING Trusts). These types of trusts can be excellent tools in the right situation to minimize tax liabilities so long as they are structured properly.

U.S. v. Kimball Case Supports the Use of a 541 Trust – Even Against IRS Lien

One of the simplest planning techniques to protect against claims from creditors, even the IRS, is to use a properly drafted irrevocable non self-settled trust. For generations, courts have found that these types of trusts will not be accessible by the creditors of the individual creating the trust.

In U.S. v. Kimball, Jr., 117 AFTR 2d 2016-811, (DC ME), 06/24/2016, the United States District Court District of Maine addressed two separate counts. The first count was granted on summary judgment, resulting in a judgment of $1,090,700.05 in unpaid taxes and penalties against Mr. Kimball as an individual. The second count was an attempt to have the tax lien attach to a trust that Mr. Kimball created. The Court denied the second count on summary judgment. In other words, the assets in the trust were safely protected from the tax lien.

The Court found that the trust was not the property of Mr. Kimball and the tax lien should not attach to the trust property. Mr. Kimball created the trust naming his children as beneficiaries and himself as trustee. The trust included flexible provisions, but the trust restricted any changes that would cause Mr. Kimball to become a beneficiary of the trust. In the event of changes to the trust, the relevant property would go to the beneficiaries of the trust, and not to Mr. Kimball.

The type of trust used by Mr. Kimball was a non-self-settled trust. This type of trust is a trust that does not name the settlor as a beneficiary, but instead the trust names a third party as the beneficiary of the trust (i.e. naming the settlor’s spouse or children as beneficiaries). Because the trust is not “self-settled” the creditors of the settlor cannot reach into the trust, so long as there are no fraudulent transfers into the trust.

A powerful asset protection solution is to combine the asset protection benefits from using a non-self-settled trust with the flexibility provided by the grantor retaining a special power of appointment. A special power of appointment is a tool that provides the settlor with a lot of flexibility while still protecting the trust from creditors’ claims. Court cases and statutes going back over 200 years have consistently held that a special power of appointment is not subject to creditors. We have created such a trust with these unique characteristics. We call our unique trust a 541 Trust®.

A non-self-settled trust has provided an elegant and powerful solution for solid asset protection. Asset protection does not need to be complicated and does not need to use a new and untested planning technique. When properly funded and operated correctly, a 541 Trust® is one of the most efficient, flexible, and effective creditor protection strategies available.

We have perfected the 541 Trust® to obtain the best in asset protection with the flexibility to adjust for changing circumstances. There are generations of court cases demonstrating that it is extremely unlikely that a creditor will be able to access the assets in a 541 Trust®.

Want to get the best in asset protection or learn more about the 541 Trust® and why the Kimball Court, on summary judgement, denied the IRS’ attempt to attach a tax lien to the trust, please call us at 801-765-0279.

Common Questions About Estate Planning Answered

The topic of estate planning and creating a Will can sometimes be a difficult subject to bring up, but it’s a very important topic to discuss with your loved ones, and with an experienced estate planning attorney. Estate planning, when done properly, can ensure that your affairs are handled properly after you pass on, that your family is taken care of, and the inheritance and property is shielded from unnecessary taxes and fines.

What is a Will?

A Will is a document designed to instruct your heirs how to divide and dispose of your tangible personal property and other assets when you pass away. A Will also designates guardians for minors. Television series often portray having a Will as the most important document to govern the administration of your estate when you pass away. This is mostly true—but if you own real estate, your Will has to go through probate. But again, guardians are elected in your Will and it is a necessary document.

What is a Trust?

A Trust is one of the most common estate planning techniques available. While there are many different variations of Trusts, they all share the same basic structure. The creator of the Trust is called the grantor who signs an agreement with a trustee who agrees to hold assets in Trust for the grantor’s chosen beneficiaries. Sometimes the grantor and the trustee are actually the same person.

Think of the Trust like a bucket. The grantor creates a bucket and puts assets into it, such as bank accounts and a home. The trustee’s job is to hold the bucket handle and the assets “in trust” for the beneficiaries named by the grantor. The trustee administers the trust according to the rules laid out by the grantor including how and when to take assets out of the bucket and give them to the beneficiaries.

The benefits of Trusts can include:

  • Probate avoidance;
  • Flexibility;
  • Cost savings;
  • Tax planning;
  • Privacy; and
  • Peace of mind.

Do I Need a Will or a Trust?

Both Wills and Trusts can be commonly used estate planning tools, and you may want to have both depending on your situation. The main differences that you will find between the two are that Wills are only effective after your death, whereas Trusts can become effective immediately (or at a specified time in the future); Wills are directives used to distribute property or appoint a legal representative after your death, whereas Trusts can distribute property at any time prior to or after your death; Wills cover all of your assets, whereas Trusts only cover items that are specifically placed in the Trust; and finally, Wills are public documents while Trusts can remain private if you choose. An experienced estate planning attorney can help you decide which is right for you.

How Important is Power of Attorney or Health Care Directive?

Granting someone “power of attorney” (POA) is a very important step in estate planning because it designates someone who can make legal decisions for you in the event you are unable to make them on your own. These can include financial decisions as well as medical or legal ones, so the person you appoint to this duty should be someone you trust and someone who knows what you would want. Without POA, these decisions could be left up to a judge in the courts, who is likely a stranger and will have no idea what you would have wanted.

A Health Care Directive (HCD) is designed to instruct medical caregivers and doctors how you want to be cared for in the event of incapacitation. Incapacity most commonly includes a coma or dementia. This document covers your Living Will wishes, which are your wishes if you are in a state of unawareness with little or no hope of recovery. You choose your own healthcare agents and tell through this document your wishes. You can revoke this document at any time while you’re competent to make decisions for yourself. 

How Often Should I Update an Estate Plan?

The best answer to this question is: as often as you need to. While there is no set time frame for updating your documents, you should make sure to revisit them any time you have a significant life event take place. This might include things like:

  • Marriage or divorce
  • Additional children, whether by birth, adoption, or marriage
  • Death of a spouse
  • Significant changes to your assets
  • Relocation
  • Changes to tax laws, or the status of guardians, trustees, or executors

Since you may not know when the tax laws change, in the absence of any of the other events, it’s a good idea to visit with an estate planning attorney in Utah about once every five years to be sure yours is up to date.

What Happens if My Family Contests My Will?

The death of a family member can be a very difficult time, and sometimes other issues within the family spillover when settling an estate plan. Fortunately there are things you can do to protect the directives spelled out in your Will, even in the face of a legal challenge after your death. Having a plan that is created and properly executed by an estate planning attorney is the best way to protect against this. It’s also helpful to discuss your wishes and plans with family members while you are alive to avoid surprises.

Estate planning can be complicated, so to answer all your questions and get started on your estate plan, call an experienced attorney today.

Piercing the Corporate Veil: Corporate Formalities and Business Records

Corporations are generally treated to be a separate entity from its owners.[1] However, the owners of a corporation (i.e. shareholders) might be held personally responsible for the debts of the corporation. Generally, this can happen when a court allows creditors to “pierce the corporate veil” or the protection offered by a corporation is destroyed by the court. A common deficiency that might lead to piercing the veil is the failure to follow corporate formalities.

Small businesses are less likely to follow corporate formalities or the steps required by the government to be shielded by the corporate veil. These entities are more at risk of having the corporate veil pierced. Corporations should comply with all contractual and statutory formalities, including, but not limited to the following:

  • Hold annual meetings of directors and shareholders;
  • Keep accurate and detailed “minutes” that document the decisions and issues addressed during a meeting;
  • Adopt and maintain company bylaws;
  • Make sure that the officers, agents, directors, and shareholders abide by the bylaws;
  • Ensure the formation documents were properly filed and recorded;
  • Renew the entity and update the public record on a timely basis to avoid any lapse in registration; and
  • Maintain separate accounts and do not commingle the entity’s financial assets with the owners’ personal assets or make them available for personal use.

Following the formalities of a corporation is important to defend against an attack that tries to pierce the corporate veil. Ultimately, a court might consider various factors when determining to pierce the corporate veil, such as evaluating whether: (1) a corporation was engaged in fraud or promotes injustice; (2) an entity was inadequately capitalized; (3) an entity is an alter ego of another individual or group of individuals; and (4) an entity fails to follow corporate formalities.

If your company is at risk, you might consider having a qualified attorney assist in completing the corporation’s annual minutes. In some cases a complete legal audit might prove beneficial to identify vulnerabilities and additional risks from failing to maintain proper formalities.

[1] E.g., United States v. Bestfoods, 524 U.S. 51, 55-56 (1998).

Who Needs Asset Protection?

asset-protection-page

We are often asked when asset protection is necessary or helpful. Some believe asset protection might only be helpful once you accumulate millions of dollars in assets–but this isn’t always true. We help many wealthy clients and we also assist clients with only a few hundred thousand dollars in assets who want to protect those assets against outside liabilities.

Liability can arise for anyone. The risk of liability might come from driving a car, operating a business, being sued for professional malpractice, suffering economic downturns, engaging in bad investment deals, being subject to lawsuits, entering bankruptcy, and other similar risks. The key is to assess your specific situation and determine how to protect against those risks.

Here is a quick list of individuals who might benefit from some type of asset protection:

  • Professions with high liability risk (i.e. physician, dentist, attorney, accountant, engineer, and other similar professions)
  • Business Owners
  • Property Owners
  • Individuals who are close to retirement and want to protect retirement savings while still engaging in business ventures and other activities that might put retirement savings at risk.
  • Individuals who have accumulated substantial equity in real property, savings, or investments which with individual needs or wants to protect.

There are many ways to protect your assets such as maintaining liability insurance, using business entities for your business (corporations, LLCs, etc.), creating irrevocable trusts, and various other strategies. No two situations are exactly alike and everyone has different goals and risk tolerance. Finding the right solution to reach your goal is important.

To begin protecting your assets, we generally recommend that clients obtain adequate insurance coverage that frequently exceeds the minimum requirements. We can then analyze your situation and the available options to determine a plan that is unique to your situation.

Timing is important. It is essential to consider asset protection before a claim or liability arises. You can greatly reduce your risk exposure by implementing a plan before you are facing a claim or liability.

Hopefully, you will never need to test your asset protection plan. In any case, you will want the peace of mind and comfort of knowing that your plan will work and your assets are protected and can withstand lawsuits and unforeseen circumstances. We provide a free consultation to help you determine the most effective and appropriate asset protection strategy for your situation.