Wills v. Trusts
| Publication year | 1997 |
| Pages | 18 |
| Citation | Vol. 10 No. 7 Pg. 18 |
1997 Annual Meeting of the Utah State Bar
Earl D. Tanner, Jr.
This article is about the choice to avoid probate. Certainly, no one would advise abandoning wills or trusts. One need not look far, however, to find a client who strongly desires that his or her family not suffer the expense, delay, and assorted supposed horrors of probate. The "holy grail" to these clients is frequently the fully funded, revocable, intervivos trust.
Revocable intervivos trusts are valid trusts despite the ability of the settlor to revoke them. Groesbeck v. Groesbeck, 935 P.2d 1255 (Utah 1997). They are common documents in estate planning and may permit property that was transferred into the trust during the settlor's life to be transferred to beneficiaries after the settlor's death without a visit to the probate court.
The wisdom of avoiding probate will be addressed by examining various issues which are likely to arise in a decedent's estate. A universal answer is not proposed, although probate is certainly not a great villain and is probably a good idea in most plans. The attorney's advice will be based upon the client's specific situation and concerns. These materials may be useful both as a brief outline for the attorney's analysis and as a tool for educating the client who fears probate but is not acquainted with the details.
DIFFERENCES IN DOCUMENTATION
The chart titled "Documentation" shows typical estate planning documents for plans which do and do not include probate. These are intended to be illustrative only. One can certainly establish trusts inside a will instead of using a separate document, but such testamentary trusts cannot be funded prior to death. Furthermore, there are many types of nonprobate transfers besides trusts, i.e., life insurance, joint tenancy, P.O.D. accounts, etc.
Note that a fully-funded intervivos trust is required to avoid probate unless assets pass by other nonprobate transfers or the estate is small enough to transfer by affidavit (U.C.A. § 75-3-1201). Note also that more complex estates require about the same documentation whether or not probate is intended, e.g. the initial costs are very similar, except for the cost of transferring assets into the trust.
A pour-over will should be executed along with a trust regardless whether probate is intended. There is always the possibility that an asset may not be successfully transferred to the trust prior to death. There is also the possibility that the estate may receive property after the decedent's death.
The pour-over will should usually be probated even if there are no assets to administer. This can be done without appointing a personal representative. If the will is not probated within three years after the decedent's death, it cannot be probated at all (with few exceptions). If the pour-over will is not probated, estate assets will pass by intestacy, which may not be the client's intent. Further, a probated pour-over will gives the trustee/devisee standing to object to a waiver of the limitations that may bar a creditor's claims (U.C.A. 75-3-802). We'll go over more on creditors' claims later.
CONFIDENTIALITY
The "Confidentiality" chart compares | the disclosures made in probate to those in trust transfers. Many clients do not want their personal affairs to be made any more public than necessary. A few feel strongly enough about privacy to make it an objective of their planning. Documents that are filed with the probate court are generally open to public inspection, thus a probated will can be read by anyone. Other important information, such as the inventory, accounting, or plan of distribution may or may not be placed in the probate file, depending upon the particular estate. If the personal representative needs the protection of court determinations, more information will be disclosed in the file.
Trust transfers do nol insure there will be no record in a probate court. Trustees also occasionally need the protection of court determinations.
POST-MORTEM PROCEDURE '
The chart titled "Post-Mortem Procedure" compares the tasks to be done in an estate which includes a probate to the tasks when probate is not required. The point is that avoiding probate does not trivialize post-mortem chores. The true savings from avoiding the expense of probate are usually not large. If one accounts for the time value of money, the extra cost of setting up a trust in a simple estate may well be more than the cost of a probate.
CREDITORS
The "Claims of Decedent's Creditors" chart compares the treatment of a decedent's creditors in a probate proceeding with their treatment if all assets were transferred to a revocable intervivos trust prior to the decedent's death. While U.C.A. § 75-3-801, et seq. provides a good road map for the probate proceeding, this writer is not aware of a reported Utah case detailing the action against the trust.
There are Utah decisions applying Utah's old fraudulent conveyances statute (U.C.A. § 25-1-1, et seq.) to creditors' rights against a trust while the settlor is still living. See Leach v. Anderson, 535 P.2d 1241 (Utah 1975), and McGoldrich v. Walker, 838 P.2d 1139...
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