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First Substitute H.B. 138

Representative Merlynn T. Newbold proposes the following substitute bill:





Sponsor: Merlynn T. Newbold

             6      This act creates new provisions relating to trusts. It provides that the creditors of a grantor
             7      of an inter vivos revocable trust may be limited to three months for the presentation of
             8      claims against the grantor's estate after his death, and provides guidelines for the notice and
             9      presentation of claims.
             10      This act affects sections of Utah Code Annotated 1953 as follows:
             11      ENACTS:
             12          75-7-308, Utah Code Annotated 1953
             13          75-7-309, Utah Code Annotated 1953
             14          75-7-310, Utah Code Annotated 1953
             15          75-7-311, Utah Code Annotated 1953
             16          75-7-312, Utah Code Annotated 1953
             17          75-7-313, Utah Code Annotated 1953
             18          75-7-314, Utah Code Annotated 1953
             19          75-7-315, Utah Code Annotated 1953
             20          75-7-316, Utah Code Annotated 1953
             21          75-7-317, Utah Code Annotated 1953
             22          75-7-318, Utah Code Annotated 1953
             23          75-7-319, Utah Code Annotated 1953
             24      Be it enacted by the Legislature of the state of Utah:
             25          Section 1. Section 75-7-308 is enacted to read:

             26          75-7-308. Notice to creditors.
             27          (1) A trustee for an inter vivos revocable trust, upon the death of the settlor, may publish
             28      a notice to creditors once a week for three successive weeks in a newspaper of general circulation
             29      in the county where the settlor resided at the time of death, providing the trustee's name and
             30      address and notifying creditors of the deceased settlor to present their claims within three months
             31      after the date of the first publication of the notice or be forever barred.
             32          (2) A trustee may give written notice by mail or other delivery to any known creditor of
             33      the deceased settlor, notifying the creditor to present his claim within 90 days from the published
             34      notice if given as provided in Subsection (1) or within 60 days from the mailing or other delivery
             35      of the notice, whichever is later, or be forever barred. Written notice shall be the notice described
             36      in Subsection (1) or a similar notice.
             37          (3) The trustee shall not be liable to any creditor or to any successor of the deceased settlor
             38      for giving or failing to give notice under this section.
             39          Section 2. Section 75-7-309 is enacted to read:
             40          75-7-309. Limitations on presentation of claims.
             41          (1) All claims against a deceased settlor which arose before the death of the deceased
             42      settlor, including claims of the state and any subdivision of it, whether due or to become due,
             43      absolute or contingent, liquidated or unliquidated, founded on contract, tort, or other legal basis,
             44      if not barred earlier by other statute of limitations, are barred against the deceased settlor's estate,
             45      the trustee, the trust estate and the beneficiaries of the deceased settlor's trust, unless presented
             46      within the earlier of the following:
             47          (a) one year after the settlor's death; or
             48          (b) the time provided by Subsection 75-3-308 (2) for creditors who are given actual notice,
             49      and where notice is published, within the time provided in Subsection 75-3-308 (1) for all claims
             50      barred by publication.
             51          (2) In all events, claims barred by the nonclaim statute at the deceased settlor's domicile
             52      are also barred in this state.
             53          (3) All claims against a deceased settlor's estate or trust estate which arise at or after the
             54      death of the settlor, including claims of the state and any of its subdivisions, whether due or to
             55      become due, absolute or contingent, liquidated or unliquidated, founded on contract, tort, or other
             56      legal basis are barred against the deceased settlor's estate, the trustee, the trust estate and the

             57      beneficiaries of the deceased settlor, unless presented as follows:
             58          (a) a claim based on a contract with the trustee within three months after performance by
             59      the trustee is due; or
             60          (b) any other claim within the later of three months after it arises, or the time specified in
             61      Subsection (1).
             62          (4) Nothing in this section affects or prevents:
             63          (a) any proceeding to enforce any mortgage, pledge, or other lien upon property of the
             64      deceased settlor's estate or the trust estate;
             65          (b) to the limits of the insurance protection only, any proceeding to establish liability of
             66      the deceased settlor or the trustee for which he is protected by liability insurance; or
             67          (c) collection of compensation for services rendered and reimbursement for expenses
             68      advanced by the trustee or by the attorney or accountant for the trustee of the trust estate.
             69          Section 3. Section 75-7-310 is enacted to read:
             70          75-7-310. Manner of presentation of claims.
             71          (1) Claims against a deceased settlor's estate or inter vivos revocable trust shall be
             72      presented as follows:
             73          (a) The claimant may deliver or mail to the trustee, or the trustee's attorney of record, a
             74      written statement of the claim indicating its basis, the name and address of the claimant, and the
             75      amount claimed. The claim is considered presented upon the receipt of the written statement of
             76      claim by the trustee or the trustee's attorney of record. If a claim is not yet due, the date when it
             77      will become due shall be stated. If the claim is contingent or unliquidated, the nature of the
             78      uncertainty shall be stated. If the claim is secured, the security shall be described. Failure to
             79      describe correctly the security, the nature of any uncertainty, and the due date of a claim not yet
             80      due does not invalidate the presentation made.
             81          (b) The claimant may commence a proceeding against the trustee in any court where the
             82      trustee may be subjected to jurisdiction to obtain payment of the claim against the deceased
             83      settlor's estate or the trust estate, but the commencement of the proceeding must occur within the
             84      time limited for presenting the claim. No presentation of claim is required in regard to matters
             85      claimed in proceedings against the deceased settlor which were pending at the time of the deceased
             86      settlor's death.
             87          (2) If a claim is presented under Subsection (1)(a), no proceeding thereon may be

             88      commenced more than 60 days after the trustee has mailed a notice of disallowance; but, in the
             89      case of a claim which is not presently due or which is contingent or unliquidated, the trustee may
             90      consent to an extension of the 60-day period, or to avoid injustice, the court, on petition, may order
             91      an extension of the 60-day period, but in no event may the extension run beyond the applicable
             92      statute of limitations.
             93          Section 4. Section 75-7-311 is enacted to read:
             94          75-7-311. Classification of claims.
             95          (1) If the applicable assets of the deceased settlor's estate or trust estate are insufficient to
             96      pay all claims in full, the trustee shall make payment in the following order:
             97          (a) reasonable funeral expenses;
             98          (b) costs and expenses of administration;
             99          (c) debts and taxes with preference under federal law;
             100          (d) reasonable and necessary medical and hospital expenses of the last illness of the
             101      deceased settlor, including compensation of persons attending him, and medical assistance if
             102      Section 26-19-13.5 applies;
             103          (e) debts and taxes with preference under other laws of this state; and
             104          (f) all other claims.
             105          (2) No preference shall be given in the payment of any claim over any other claim of the
             106      same class, and a claim due and payable shall not be entitled to a preference over claims not due.
             107          Section 5. Section 75-7-312 is enacted to read:
             108          75-7-312. Allowance of claims.
             109          (1) As to claims presented in the manner described in Section 75-7-310 and within the
             110      time limit prescribed in Section 75-7-309 , the trustee may mail a notice to any claimant stating that
             111      the claim has been allowed or disallowed. If, after allowing or disallowing a claim, the trustee
             112      changes the decision concerning the claim, the trustee shall notify the claimant. The trustee may
             113      not change a disallowance of a claim after the time for the claimant to file a petition for allowance
             114      or to commence a proceeding on the claim has expired and the claim has been barred. If the notice
             115      of disallowance warns the claimant of the impending bar, a claim which is disallowed in whole
             116      or in part by the trustee is barred so far as not allowed, unless the claimant seeks a court-ordered
             117      allowance by filing a petition for allowance in the court or by commencing a proceeding against
             118      the trustee not later than 60 days after the mailing of the notice of disallowance or partial

             119      allowance. If the trustee fails to mail notice to a claimant of action on the claim within 60 days
             120      after the time for original presentation of the claim has expired, this failure has the effect of a
             121      notice of allowance.
             122          (2) Upon the petition of the trustee or a claimant in a proceeding for this purpose, the court
             123      may order any claim presented to the trustee or trustee's attorney in a timely manner and not barred
             124      by Subsection (1) to be allowed in whole or in part. Notice of this proceeding shall be given to the
             125      claimant, the trustee, and those other persons interested in the trust estate as the court may direct
             126      by order at the time the proceeding is commenced.
             127          (3) A judgment in a proceeding in another court against the trustee to enforce a claim
             128      against a deceased settlor's estate is a court-ordered allowance of the claim.
             129          (4) Unless otherwise provided in any judgment in another court entered against a trustee,
             130      allowed claims bear interest at the legal rate for the period commencing six months after the
             131      deceased settlor's date of death unless based on a contract making a provision for interest, in which
             132      case they bear interest in accordance with that provision.
             133          Section 6. Section 75-7-313 is enacted to read:
             134          75-7-313. Payment of claims.
             135          (1) Upon the expiration of the earliest of the time limitations provided in Section 75-7-309
             136      for the presentation of claims, the trustee shall pay the claims allowed against the deceased settlor's
             137      estate in the order of priority prescribed, for claims already presented which have not yet been
             138      allowed or whose allowance has been appealed, and for unbarred claims which may yet be
             139      presented, including costs and expenses of administration. By petition to the court in a proceeding
             140      for that purpose, a claimant whose claim has been allowed but not paid as provided in this section
             141      may secure an order directing the trustee to pay the claim to the extent that funds of the deceased
             142      settlor's estate or trust estate are available for the payment.
             143          (2) The trustee at any time may pay any just claim that has not been barred, with or without
             144      formal presentation, but he shall be personally liable to any other claimant whose claim is allowed
             145      and who is injured by the payment if:
             146          (a) the payment was made before the expiration of the time limit stated in Subsection (1)
             147      and the trustee failed to require the payee to give adequate security for the refund of any of the
             148      payment necessary to pay other claimants; or
             149          (b) the payment was made, due to the negligence or willful fault of the trustee, in a way

             150      that deprived the injured claimant of his priority.
             151          Section 7. Section 75-7-314 is enacted to read:
             152          75-7-314. Secured claims.
             153          Payment of a secured claim shall be upon the basis of the amount allowed if the creditor
             154      surrenders his security; but otherwise payment shall be based upon the one of the following:
             155          (1) if the creditor exhausts his security before receiving payment, unless precluded by
             156      another provision of the law, upon the amount of the claim allowed less the fair value of the
             157      security; or
             158          (2) if the creditor does not have the right to exhaust his security or has not done so, upon
             159      the amount of the claim allowed less the value of the security determined by converting it into
             160      money according to the terms of the agreement pursuant to which the security was delivered to the
             161      creditor, or by the creditor and trustee by agreement, arbitration, compromise, or litigation.
             162          Section 8. Section 75-7-315 is enacted to read:
             163          75-7-315. Claims not due and contingent -- unliquidated claims.
             164          (1) If a claim which will become due at a future time or a contingent or unliquidated claim
             165      becomes due or certain before the distribution of the trust estate, and if the claim has been allowed
             166      or established by a proceeding, it shall be paid in the same manner as presently due and absolute
             167      claims of the same class.
             168          (2) In other cases the trustee, or, on petition of the trustee or the claimant in a special
             169      proceeding for that purpose, the court, may provide for payment as follows:
             170          (a) if the claimant consents, he may be paid the present or agreed value of the claim, taking
             171      any uncertainty into account; or
             172          (b) arrangement for future payment, or possible payment, on the happening of the
             173      contingency or on liquidation may be made by creating a trust, giving a mortgage, obtaining a bond
             174      or security from a beneficiary, or otherwise.
             175          Section 9. Section 75-7-316 is enacted to read:
             176          75-7-316. Counterclaims.
             177          (1) In allowing a claim, the trustee may deduct any counterclaim which the deceased
             178      settlor's estate has against the claimant. In determining a claim against a deceased settlor's estate,
             179      a court shall reduce the amount allowed by the amount of any counterclaims and, if the
             180      counterclaims exceed the claim, render a judgment against the claimant in the amount of the

             181      excess.
             182          (2) A counterclaim, liquidated or unliquidated, may arise from a transaction other than that
             183      upon which the claim is based.
             184          (3) A counterclaim may give rise to relief exceeding in amount or different in kind from
             185      that sought in the claim.
             186          Section 10. Section 75-7-317 is enacted to read:
             187          75-7-317. Execution and levies prohibited.
             188          (1) No execution may issue upon nor may any levy be made against any property of the
             189      deceased settlor's estate under any judgment against a deceased settlor or a trustee.
             190          (2) This section may not be construed to prevent the enforcement of mortgages, pledges,
             191      or liens upon real or personal property in an appropriate proceeding.
             192          Section 11. Section 75-7-318 is enacted to read:
             193          75-7-318. Compromise of claims.
             194          When a claim against a deceased settlor's estate has been presented in any manner, the
             195      trustee may, if it appears in the best interest of the deceased settlor's estate, compromise the claim,
             196      whether due or not due, absolute or contingent, liquidated or unliquidated.
             197          Section 12. Section 75-7-319 is enacted to read:
             198          75-7-319. Encumbered assets.
             199          (1) If any assets of the deceased settlor's estate are encumbered by mortgage, pledge, lien,
             200      or other security interest, the trustee may pay the encumbrance or any part thereof, renew or extend
             201      any obligation secured by the encumbrance, or convey or transfer the assets to the creditor in
             202      satisfaction of his lien, in whole or in part, whether or not the holder of the encumbrance has
             203      presented a claim, if it appears to be in the best interest of the deceased settlor's estate.
             204          (2) Payment of an encumbrance does not increase the share of the beneficiary entitled to
             205      the encumbered assets unless the beneficiary is entitled to exoneration or unless the terms of the
             206      deceased settlor's trust, under which the beneficiary is entitled to the encumbered assets, provides
             207      otherwise.

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