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Educational Materials: Estate Planning Q & A

What is estate planning?
How is estate planning done?
Do I really need a will?
Can I determine what happens to my children after my death?
What can a will do for me?
Does a will require probate?
Is probate costly or complicated?
How do I make a will and what should a will contain?
What is a self-proved will?
Do I need a lawyer?
Can I later change my will?

What is estate planning?

Several things must be accomplished when a person dies. After the funeral services or last rites are completed, the decedent's personal belongings must be gathered, creditors must be paid, including the expenses of last illness and funeral and payment of any taxes which may be due, and all estate property must be distributed. Guardians or adoptive parents will be required for any unmarried minor children left without a parent. The estate plan of an individual is simply the mechanism which is used to accomplish these things.

Estate plans can include provisions for care and assistance, and can even give directions to loved ones. For example, conservators can be arranged to assist those who can care for themselves but need help with financial affairs, or trusts can be created to give continuing guidance and protection from wasteful or impulsive use of assets over a number of years.

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How is estate planning done?

Generally, in planning your estate, it is necessary to (1) make a complete list of all of your assets, including life insurance proceeds; (2) decide what you want done with your assets after your death; (3) consider how the various estate planning tools, such as wills, trusts, joint tenancies, guardianships, etc., would operate in your specific situation; (4) decide which tools can best be used to accomplish your objectives; and (5) implement the plan by actually preparing any necessary changes in title and getting the consents from those people who will be helping with the estate plan. A good estate plan also provides for unexpected events, particularly for the untimely or simultaneous deaths of those whom you would wish to receive your assets.

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Do I really need a will?

This depends to a great extent on how your assets are titled and whether you want the State to decide how to distribute your estate. In general, if you die without a will owning any property in your name alone, that property will be given to various relatives, or to the State, in accordance with the intestate plan adopted by the State where you are a legal resident when you die, regardless of where death actually occurs. The one major exception to this rule is real property, which passes according to the rules of the State where the real property is located. If unexpected events occur, the plan established for you by the State may not end up with your desired result being accomplished.

In Utah, if your spouse survives you and you die without a will, your spouse will receive all your property as long as you do not have children that are not also the children of your spouse. If you have children who are not children of your spouse and you die without a will then your spouse will usually receive the first $50,000.00 of your estate after the payment of debts and taxes. The balance of your estate is then divided with half to your spouse and half to your children or perhaps grandchildren. If there is no surviving spouse, your estate will go to your children, parents or other relatives as set by the State.

Even without a will, this general plan will be changed if you own property in joint tenancy, there is beneficiary designated, if you title property in the name of a trust, or if certain other special circumstances are present. If you have children who are not children of your spouse, you should have a will even if all of your property is jointly held.

It is generally necessary for the court to appoint a personal representative for you. The general rules provide priorities for selection of the personal representative, although there can be problems if none of those with priority wish to serve, or if two or more with equal priority wish to serve.

For some people, the State plan may do a reasonable job of distributing their estate. However, for others, the State plan can unnecessarily increase total estate taxes, can result in unwanted and expensive accountings to the court, can distribute the assets of the estate in undesirable proportions, and can totally leave out intended heirs. For example, the State plan does not provide for contributions to charity or for nonrelatives such as step children.

Although the State plan is far from perfect, and in many cases far from desirable, it does provide for the orderly disposition of your property after your death where you have failed to make provisions yourself. Unfortunately, this plan does not extend to providing for minor children. The State plan makes virtually no provision for the orderly transfer of custody and guardianship of minors. As a result, court proceedings may be required to establish legal guardianships so that your minor children can be admitted to school, receive nonemergency medical care, participate in activities requiring parental consent, etc. Court proceedings may also be necessary where relatives disagree over who should have custody of minor children.

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Can I determine what happens to my children after my death?

Since children are not property, you do not have uncontrolled power over what happens to your minor children after your death. However, the law does recognize the importance of a quick, simple and inexpensive method of establishing custody and guardianship for your minor children. The law also assumes that parents are normally the most qualified to decide what is best for their minor children.

Utah law therefore provides that you may appoint in your will a guardian for your children to serve in the event that both you and your spouse die before your children reach age 18. When the first parent dies, custody and guardianship of the children automatically pass to the surviving parent. When the surviving parent dies, the custody and guardianship of the children will normally pass to the person(s) named in the surviving parent's will if the named guardian(s) accept the guardianship. Although the courts have the power to appoint a different guardian than the one appointed in the surviving parent's will, it is unlikely any court would do this unless such a change is clearly required in the best interest of your minor children.

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What can a will do for me?

You should have a will for several reasons. A will is an easy means by which you can appoint a guardian for your minor children, specify who will receive your property, provide for nonrelatives such as charities and funds, appoint the personal representative of your choice, waive requirements for bonds, and in many cases save taxes. Since wills have no effect until the time of death, they allow you the full use of your property while you are living.

At the same time there are no disadvantages in having a will, except possibly the cost of having the will prepared.

The advantages of a will are so substantial that virtually every well planned estate has at least a simple will, if not a will and some form of a trust. A will is often all that is needed unless one or more of the following circumstances are present:

1. You have a large estate that is subject to estate tax. In determining the size of your estate do not forget to include life insurance proceeds and retirement benefits;

2. Your assets cannot be easily divided, or alternatively easily sold and the money divided;

3. Your objectives after death cannot be met by merely dividing your assets;

4. There are special problems, such as minor children or dependents who may need special help or protection;

5. You want to avoid having your assets taxed in your children's estate after you and your children die; or

6. You want to protect your children's and grandchildren's inheritance from their future potential creditors or spousal claims in the event they get divorced.

If your circumstances fall within one or more of the above categories, you may need to use one of the other estate tools in order to achieve your goals.

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Does a will require probate?

To have full effect a will must be probated. The term "probate" refers to the legal process by which a court determines that a writing is, or is not, a valid will. It is almost always best to probate a will if it creates a guardianship, you have creditor problems, or if there is any property not transferred at death. Generally, your will cannot be probated in Utah unless it is first offered for probate within three years after your death.

Some people believe that nonwill methods, particularly joint tenancy, are preferable because they avoid probate. Although it is possible to reduce or avoid probate in many cases, it is still wise to have a will to insure against errors and the unexpected. Joint tenancy between husband and wife, for example, will avoid probate of the property upon the first death, but it will not help when the survivor dies. Therefore, a joint tenancy is inadequate where a couple both die at or about the same time, such as in a car crash. Although additional joint tenants, such as children, could be added to title to property, this may require the payment of gift taxes, subject the property to creditors of the additional joint tenants, or require the approval of all current joint tenants to either sell the property or provide for after-born or after-adopted children. Joint tenancy will also disinherit non-joint tenants and most of the time is very inflexible. As a general rule, joint tenancy is not a good tool for passing property to your children.

Other substitutes for a will, such as trusts or lifetime gifts, also have drawbacks, although they can be very valuable when used in conjunction with a will. For example, the use of non-grantor trusts can create additional income tax filing requirements during your lifetime and the making of gifts during your lifetime results in the loss of control of your property and may also result in a gift tax.

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Is probate costly or complicated?

That question can't be answered directly because there are so many variables in every estate. However, under the current probate code both the costs and complications of probate have been reduced substantially from what they were prior to 1977 when the Uniform Probate Code was adopted in Utah.

For example, a simple, uncontested estate with a valid will can be probated informally for less than the cost of a funeral, yet it provides clear and marketable title for all of the estate property, and provides security from future claims of creditors.

Where the estate is larger, or more complicated, or where a formal probate is desired, the fees will be higher. Even so, it is only in unusual cases that the attorney's fee exceeds five percent (5%) of the estate. There may be additional fees where income or estate tax returns must be filed on estates, although these returns must be made regardless of whether there is a probate. This means that the fee for tax return preparation is not caused by the probate itself.

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How do I make a will and what should a will contain?

Your will should identify itself as a will, expressly revoke all previous wills and codicils even if there are none, appoint a personal representative, appoint a guardian where minor children are or may be involved, and distribute your property. In addition, your will may have provisions leaving specific items to specific people, expressing desires concerning funeral and burial arrangements, waiving any requirement of a bond for the personal representative and various other provisions which allow your will to work with other estate planning tools or deal with particular problems. Of course, the complexity of your estate plan will vary with the complexity of your individual circumstances and the size of your estate. You must be at least 18 to make a will.

Any document which is entirely in your own handwriting, which clearly indicates that it is your will and which is signed by you can be recognized as a valid will in the State of Utah. Such a document, called a holographic will, should also be dated. However, you should be aware that holographic wills are not recognized in all states, and therefore a holographic will may be inadequate if you own property or move outside the State of Utah.

Any will which is not entirely in your own handwriting must be executed with certain formalities in order to be valid. These formalities are required by the State in order to reduce the chance of fraud, and no document which fails to observe them carefully will have any effect, regardless of the extent of hardship on the heirs, or the certainty of your intention otherwise.

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What is a self-proved will?

A self-proved will is a will which has been notarized in accordance with the provisions of the law. It is called "self-proved" because it does not need a witness to prove it is genuine in a formal probate. Self-proved wills also have an advantage over wills which are not self-proved because a self-proved will normally cannot be attacked on the ground that it was not signed in the proper way.

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Do I need a lawyer?

Although it is possible to make a valid will by yourself, most people should consider hiring an attorney who works in the estate planning field to draft their will. In addition to insuring that the will is valid, attorneys are frequently able to assist clients in improving their estate plan by suggesting alternatives or considerations which might otherwise by overlooked. Having the will drafted by an attorney may also help avoid problems caused by unclear language. It may also reduce or eliminate challenges on the grounds of undue influence, fraud, or forgery. Furthermore, the services of an attorney to prepare a simple will are not expensive in relationship to many of the problems that can often be avoided.

An attorney should be consulted where the gross value of your estate, including life insurance, retirement benefits, employer death benefits, and anything you might inherit from your spouse or others, exceeds the estate tax level, which in 2002 and 2003 is $1,000,000. You should also consult an attorney where one or more of your heirs may have trouble managing their affairs due to age, infirmity, improvidence, lack of training, or simply lack of desire, where there are businesses or partnerships involved, where there might be substantial conflict among the heirs, or where there are any other unusual or bothersome circumstances.

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Can I later change my will?

You can change your will at any time by either writing a new will or by executing a "codicil" to your existing will. A codicil is an instruction changing part of your existing will, and must be made with the same formalities as a will.

Utah law recognizes that you may change your mind about who will receive certain items of your personal property such as furniture, jewelry, paintings, sports equipment, etc. A separate writing can be used for this purpose and can be changed or replaced as often as you wish provided that (1) it is in your own handwriting or is signed by you; (2) it describes the property and who is to receive it; and (3) it can be identified as a writing that you intended for use with your will. Such a writing should also be dated.






 


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