How do I add to or remove assets from my Utah trust?

November 10, 2014 - Posted by: admin - In category:

taxes - No Responses

A trust can be likened to a safe that holds money and other valuable assets. WHO is permitted to access the safe (and the trust), HOW access is permitted and WHEN access is permitted are all key considerations.

A Utah trust is a creature of Utah state law and therefore is governed by such Utah laws, which are largely contained in the Utah Uniform Trust Code, found at Title 75, Chapter 7 of the Utah Code.  Of course, the trust is also and primarily governed by the terms of its applicable “trust agreement”, which is the legal document that establishes such trust and also contains the instructions, rules and guidelines by which such trust is to be operated now and in the future.  Therefore, when we have any questions about a Utah trust, we look to the applicable trust agreement and the applicable Utah laws governing the same.

A revocable living trust is one of the most common estate planning vehicles or tools used and so we will start our discussion around this type of trust. As it name indicates, a revocable living trust is just that—revocable (i.e. changeable). The terms of the trust agreement set for the parameters for such change, but typically the maker of the trust (known in legal terms as the “Trustor” or “Grantor”) retains the unfettered discretion to change the terms of the trust at any time the trust-maker chooses to do so. In the context of a joint married trust (somewhat akin to a joint bank account) that is established by a married couple, typically both spouses retain the right to amend the revocable trust. This power to amend or change the terms of the trust would most often include the ability to add or remove assets from such trust, but the good news is that with a few exceptions, a trust rarely needs to be amended in order to add assets to a trust, or to take assets out of the trust.  Rather, the applicable trust agreement usually sets forth the “rules” regarding WHEN assets may be removed or added, HOW such assets are removed or added and WHO is authorized to do such things.

This is no small point—that adding and removing assets typically does NOT require formal amendments to an existing trust. One of the misconceptions and myths about estate planning generally, and trusts in particular, is that once you put your property into such trust, you have given up all rights with regard to such property and can never regain the same. That doesn’t sound like such a great arrangement to most folks—and I agree if that were the general rule, trusts would be much less favored and much less useful in estate planning. HOWEVER, as already noted, this is NOT the case with regard to the vast majority of trusts that we establish for our clients and most of all trusts that have previously been established by others. Unless your trust is a different type of trust, an “irrevocable trust”, then you have or will retain all property rights with respect to assets you put into your trust and this will remain true as long as you are alive and legally able to manage your affairs.

So, now that we know that you CAN remove assets from your trust (as a general rule), HOW do you go about doing so? Are you required to have some formal authorization and/or to jump through other “legal hoops” in order to get access to trust assets? Again—good news: accessing and using assets you previously put into your trust is just as easy as accessing and using assets that are not in a trust. For example, let’s say that your bank accounts have been transferred to your revocable living trust and now you want to get some cash for a vacation and you also want to write some checks to pay bills. How does that work with your “trust accounts”? To get cash, you go to the ATM, enter your PIN and get your cash. For your bills, you write the checks, put them in the envelope and mail.

That seems pretty easy, right? That seems like it is the VERY SAME process you followed prior to putting your bank accounts into the trust, right? That is because it is the VERY SAME PROCESS! Most people are surprised, but very happy, to learn that it really is “business as usual” with regard to their property (and their lives) after they have established a revocable living trust. This is somehow not what they had expected. Indeed, the imagined “restrictions” and “lifestyle change” and “complications” associated with having a trust in place can be major impediments to people finally taking action to address their estate planning issues. This is just one of the many myths associated with estate planning and once people see that the reality is “business as usual”, that they simply live their lives in the same manner they had always lived them previously, they are often VERY eager to push forward with their estate planning work and thereby gain all of the important protections and benefits available from the same.

We should also address one last point on adding and removing assets by people other than the trust makers. As noted above, applicable Utah law, but mostly the applicable trust agreement itself, should (and normally will) address who is able to add to and remove assets from to the trust after the disability or death of the Trustor(s). Such trust maker(s) decides how this process will unfold over time and there really is not a “right” or “wrong” answer—rather, it is all a matter of personal circumstances and preferences. Likewise, it is largely dependent on the circumstances and personalities of the family members, friends and others who will benefit from such trust assets.

In summary, your trust can be likened to a safe that holds assets and you are the one who determines who can access, when they can access and how such access will be granted. Just as a safe remains viable and effective before and after assets have been added and removed from such safe, so, likewise, most of the time assets can be added and removed from a trust without the need to amend or terminate such trust. This is the general rule and most common circumstance. We will later address some exceptions to this rule, rare as they might be.

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