How do I form a trust in Utah?
October 9, 2017 - Posted by: admin - In category:
Very carefully. ? Ok, joking aside, there are a few different ways to form a trust under Utah law.
Requirements for creation of Utah trust under Utah Code 75-7-401
When in doubt, look at the applicable state statute. In this instance, if we want to understand what is required to form a valid trust under Utah law, we need to read the Utah Uniform Trust Code, which is found in Title 75, Chapter 7 of the Utah Code. Under that statute, a trust may be created in three ways. Since it’s a short and fairly straight-forward provision, let’s just quote it:
75-7-401. Methods of creating trust.
(1) A trust may be created by:
(a) transfer of property to another person as trustee during the settlor’s lifetime or by will or other disposition taking effect upon the settlor’s death;
(b) declaration by the owner of property that the owner holds identifiable property as trustee; or
(c) exercise of a power of appointment in favor of a trustee.
The most common method of forming a trust is to enlist the services of a qualified and trustworthy (pun intended) attorney who then drafts the trust agreement (a/k/a declaration of trust) in conformity with the above-referenced statute and other applicable Utah laws.
For example, Utah Code 75-7-402 addresses the “Requirements for creation” of a trust in Utah. Such requirements include the maker of the trust (known as the settlor) being legally competent, the clear intent of the settlor to establish a trust and the general rule that the newly established trust has at least one definite beneficiary. That same code section also requires trustee duties and specifies that the same person cannot be both the sole trustee and the sole beneficiary of the trust.
Each of those items must be true and should be clearly outlined in the trust agreement. Hence, the importance of enlisting a qualified estate planning attorney in this process. Otherwise, if someone goes with the do-it-yourself route of estate planning endeavors to establish their trust, one or more of those required elements might be missing. In that case, all the best intentions will not result in a valid trust under Utah law (or likely under any other state law).
Please, please, please (repeated several more times…) remember that formation of a trust, even if done perfectly, is NOT the end of the process. Rather, such formation is akin to building a barn or a safe. Each of those structures is intended to hold and protect something, right? In the same way, a trust is intended to “hold” one or more assets. However, far too often (perhaps even most of the time), we find that trusts have been formed with this intention of then using the same for the holding, management and eventual distribution of assets, but such assets are never legally connected to the trust. In those sad situations, the trust serves no benefit and is then as worthless as an empty barn or empty safe. We have covered this key point of trust funding on several earlier occasions. Click here to read more on that subject.