What is an Estate Plan?

An estate plan is an arrangement (or combination of arrangements) for the management and

transfer of your assets. A good estate plan will protect your family from the legal risks of

incapacity and reduce the problems caused by your inevitable “promotion to glory.” A good

estate plan will also provide your answers to these questions:

1. Who will receive your assets?

2. How will those assets be supervised and protected?

3. Who will have the duty to carry out your instructions.

A good estate plan often includes one or more of the following documents: Will, trust, power of

attorney, health care directive, living will, and medical power of attorney. But those documents

need to reflect your unique goals and circumstances. You should think about your situation,

family, and desires and then carefully complete the needed documents and forms with the

assistance of your attorney. Of course you should tackle this important job now before

"something happens." You should also review all of your beneficiary designations on your life

insurance policies, retirement plans, annuities and IRAs. You need to make sure they are

correct and up to date. You may be surprised to learn that these designations “trump” any thing

you say in your will and/or trust documents. You don’t want to surprise your family by creating

competing or inconsistent “plans” for different assets. For example, suppose you want your

spouse to get your life insurance, but you forgot to change your beneficiary designation (that

named your parents as beneficiaries). The fact that you later married does not change your

contract with the insurance company. The life insurance will go to the persons named – your

parents – instead of your spouse.

What is a will?

A will is a legal document that states your desires concerning what will happen to your assets

after your death. A will also contains your other specific directions concerning who is to

implement your instructions and, perhaps, who will care for any minor or disabled children you

may leave behind. A will is especially important for parents with young children. You should

name a guardian (and preferably a successor) for your children in case the other parent also

dies while a child is a minor.

What is the difference between a will and a trust?

A will is simply a way for you to express how you want assets distributed upon death, nominate

a person to serve as personal representative, nominate a guardian for your minor children to

serve if the children’s other parent is dead, and state marital status and list the children, if any.

To be effective, wills must be probated. But only the assets of your probate estate will pass to

your beneficiaries via your will and/or the probate process. Please note that assets controlled

by other arrangements - such as contracts or joint tenancy - are excluded from your probate

estate. Couples can use these arrangements to avoid the probate process (at least for the first

death), but they need to be coordinated with your will and/or trust.

A trust is also a way for you to express how you want your assets distributed upon death. A

trust is a contract between you as the trustor and the person you name to serve as trustee.

The trustor is the person that creates the trust and the trustee manages the trust. In many

trusts you can be the trustor and you can appoint yourself to serve as the trustee. The trustor

names the beneficiaries of the trust and gives instructions for how and when they receive

benefits from the trust.

Most trusts are amendable and revocable. That means you can change the trust’s provisions at

any time, or (if you prefer) you can terminate the trust and get the assets back. A revocable

trust typically becomes irrevocable at the death of the trustor – or, in the case of a joint trust

with two trustors, the trust becomes irrevocable at the death of the second trustor. Usually you

create and fund a trust while you are living – that way, all assets controlled by the trust prior to

your death will pass to your beneficiaries free from the probate process.

Trusts almost always include more detail about your goals (a) in case you become disabled

and (b) how you want your beneficiaries to receive your assets upon your death (in trust,

outright, or over a certain term). This is especially important in planning for beneficiaries with

disabilities, or who cannot handle money. Trusts are essential for beneficiaries you want

protected from creditors and failed marriages.

Many goals can be met using either a trust or will. Many good plans use both.

Why should I set up a trust or make a will?

If you die without a valid trust or will, the laws of your state will determine what happens to your

assets. Your wishes will not be known and therefore your assets may not go where (or how)

you want them to go. And, your children may end up with the wrong guardians. In Utah if you

are married but have children from a former relationship, your spouse will get the first $50,000

of your estate and (generally) he or she will split the balance 50/50 with all of your children.

But, if you own your house or any other asset with your spouse as “joint tenants,” your spouse

will get 100% and no portion of those assets will go to your children.

Are all of my assets controlled by my trust and/or my will when I die?

Maybe – only if you coordinate them properly. For example, proceeds of life insurance policies

and retirement plan assets are distributed to the people or the trust you select via your

beneficiary designation form. A bank account that you own jointly with another person will go to the other joint owner. It is extremely important that you coordinate the disposition of these

assets with the plan of disposition for your assets that you create in your will and/or trust.

What is Probate?

Probate is a court procedure by which a will is proved to be valid or invalid, creditors can have

their claims paid or litigated, and title to assets in your sole name is transferred to your

beneficiaries.

A will does not avoid probate. During the probate process, your will, if any, is submitted to the

court with paperwork asking for an executor or personal representative (“PR”) to be appointed.

Upon appointment, the PR collects the assets; notifies heirs and creditors; pays administrative

expenses; pays statutory allowances, if applicable; pays any taxes; pays any creditors in a

priority set by law; and distributes the remaining assets, if any, to your heirs.

Probate only includes assets in your name alone. Those assets which have beneficiary

designations pass to those beneficiaries free of the probate process. Ditto for joint tenancy

assets, and all assets controlled by a trust. If there are not enough assets in your probate

estate to pay your creditors, etc., some non-probate assets may be brought back in to pay

expenses (see Utah statutes for details).

On the other hand, your family need not take your will to the probate court. Sometimes all of

your assets are controlled the laws of joint tenancy, by your trust or by your beneficiary

designations. If your estate is less than $100,000, a small estate affidavit can be used to

collect and transfer cars and personal property. However, all real property in your sole name

prior to your death – and all real property held as a tenant in common – must be probated.

There are expenses to probate that people do not like to pay (attorneys fees, court costs, PR

fees). And the probate process can take a long time – it usually takes six to eighteen months to

handle a probate, and your assets can be tied up for that time period.

What is a Living Will?

An advance medical directive or “living will” is separate from your will. But it’s a very important

document. It comes into play only if you have a terminal, incurable medical condition, if your life

is only being prolonged by means of artificially provided life support, and if you cannot

communicate your desires. In that situation, your living will tells your family and doctors your

wishes so they can act upon your desires concerning medical life support. This document is

effective until you revoke it, which you may do at any time by physically destroying it or by

making a new living will.

What is a Medical Power of Attorney?

A medical power of attorney permits you to name another person who will have the power to

communicate with your doctors and make health care decisions for you if you are not able to do so for yourself.

What is a Health Care Directive?

In Utah, thanks to a recent change of law, your Advance Health Care Directive gives you a

living will plus a medical power of attorney in a single document.

Does my will and/or trust still apply if I move out of Utah?

Yes. Wills and trusts validly executed here are honored in all other states. But each state has

its own forms and requirements for health care directives, living wills, and/or medical powers of

attorney. So, if you move, you should get an up dated set of those documents.]\

Estate Planning Glossary

Trustor: A person who creates or establishes a trust. The trustor (or trustors)

control the content of the trust agreement; the trustor decides what

provisions, plans, instructions, etc., go into the trust agreement. In the

legal language of trusts, a trustor is also sometimes called the grantor,

creator, or settlor. In many trust agreements, you are the "Trustor."

Trustee: A person or bank who accepts the responsibility to carry out all the

instructions, plans and provisions detailed in a trust agreement. Usually,

at least until death, resignation, or incapacity, you can serve

simultaneously as the Trustee and Trustor. Following your passing or

incapacity, the person you picked in advance will become your Successor

Trustee. Then, he or she will act exclusively on your behalf, protect your

best interests, and carry out your instructions.

Beneficiary: Any person who, according to the terms of the trust agreement shall or

might receive any benefit, distribution, etc. Usually, you appear in your

estate planning documents simultaneously as the Trustor, Trustee, and

Beneficiary.

Fiduciary: A person who agrees to accept certain responsibilities and to act

primarily for the benefit of someone else. Your estate planning

documents refer to several types of fiduciaries: Trustees, Agents,

Personal Representatives, Guardians, etc.

Agent: A fiduciary, usually your spouse or a close relative, who agrees to act on

your behalf pursuant to your power of attorney document (which will be

used if you become incapacitated).

Personal

Representative: A fiduciary, a person or bank, whom you appoint to act on your behalf,

after death, pursuant to the terms of your last will.

Guardian: A fiduciary who agrees to act on your behalf with respect to raising and

caring for minor or incapacitated children.