This content was published prior to the combination of Dentons and Durham Jones & Pinegar. Learn more about Dentons Durham Jones Pinegar. 

They say “you can’t have your cake and eat it too” – but Utah’s legislature recently created an exception to this adage by strengthening legislation for Utah Domestic Asset Protection Trusts (“UDAPT”).  For hundreds of years, creditors have had access to any assets held in a trust you set up if you retain the right to take assets out of the trust for your own benefit.  The only way around this was to set up an expensive, cumbersome, and controversial off-shore trust.  However, Utah’s recent legislative changes make asset protection trusts a viable, affordable, and legitimate option right here in Utah.  In fact, Utah now has one of the best asset protection trust statutes in the country.

Who should Consider Setting up a Utah Asset Protection Trust?

You should consider a UDAPT if you are in a high-liability profession, if you have a high net worth, or if you just want to shield some of your hard-earned assets from creditors such as a home, investment accounts, a business, a cabin, a ranch, or other real estate.  UDAPTs are frequently used to protect a nest-egg of assets to ensure that you have enough assets protected to live a comfortable life in the litigious and unpredictable world we live in where lawsuits can be brought against you for any reason or no reason at all.

How does a UDAPT Work?

Under Utah’s asset protection trust laws, you are allowed to fund a trust with any type of assets you want to protect, you maintain complete control over the investment of the assets in the trust, and you can name yourself, your spouse, and your family as beneficiaries of the trust to receive the assets if you need them in the future, so long as you have a co-trustee who makes distribution decisions.  The statute does not prevent you from naming a trusted friend, family member, or advisor as the co-trustee.

For the trust to be effective in shielding your assets against creditors, the trust must have at least one Utah trustee, it must hold some Utah assets (but it can also hold assets in other states), and you must sign an affidavit declaring that you are still solvent (meaning you have more assets than liabilities) after making any contribution to the trust.  The trust must be irrevocable, but flexibility can be built into the trust to allow for the removal and replacement of trustees and to change the ultimate distribution of the assets at your death.  Once you have appropriately moved assets into your UDAPT, those assets are immediately protected against future involuntary creditors.  Existing creditors are limited to bringing a fraudulent conveyance claim within the later of two years after the property is transferred to the trust or one year after the creditor reasonably could have discovered the transfer.  This period can be reduced to 120 days by sending notice to known creditors, and by publishing notice for unknown creditors.

What if I already have a Standard Living Trust?

Your standard living trust does not provide any asset protection.  It is still a useful vehicle for managing your property during your lifetime, transferring property at your death, and avoiding probate, but creditors have full access to the assets in your standard living trust.  Your UDAPT can be set up as a companion to your living trust and accomplishes the same objectives, with the additional perk that the assets are protected from creditors.

While no form of asset protection is guaranteed, a UDAPT is sanctioned by a Utah statute and provides an excellent vehicle for maintaining control of your assets, maintaining the option of accessing the assets if necessary, and providing a basis for protecting your hard-earned assets from unexpected or illegitimate liabilities.

To learn more about how a UDAPT can benefit you, contact Matt Hafen at (435) 674-0400.