1     
DOMESTIC ASSET PROTECTION TRUST AMENDMENTS

2     
2015 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Earl D. Tanner

5     
Senate Sponsor: ____________

6     

7     LONG TITLE
8     General Description:
9          This bill creates a new Asset Protection Trust framework.
10     Highlighted Provisions:
11          This bill:
12          ▸     defines terms;
13          ▸     creates a new type of asset protection trust;
14          ▸     requires the asset protection trust to be registered with the Division of Corporations;
15          ▸     allows the trust to be revocable or irrevocable;
16          ▸     allows trusts created under the current asset protection trust statute to register and
17     back-date the assets; and
18          ▸     makes technical and conforming amendments.
19     Money Appropriated in this Bill:
20          None
21     Other Special Clauses:
22          This bill provides a special effective date.
23     Utah Code Sections Affected:
24     AMENDS:
25          75-2-205, as last amended by Laws of Utah 2003, Second Special Session, Chapter 3
26          75-7-107, as renumbered and amended by Laws of Utah 2004, Chapter 89
27          75-7-301, as repealed and reenacted by Laws of Utah 2004, Chapter 89

28          75-7-501, as repealed and reenacted by Laws of Utah 2004, Chapter 89
29          75-7-505, as enacted by Laws of Utah 2004, Chapter 89
30          75-7-816, as enacted by Laws of Utah 2004, Chapter 89
31     ENACTS:
32          25-7-101, Utah Code Annotated 1953
33          25-7-102, Utah Code Annotated 1953
34          25-7-103, Utah Code Annotated 1953
35          25-7-104, Utah Code Annotated 1953
36          25-7-105, Utah Code Annotated 1953
37          25-7-106, Utah Code Annotated 1953
38          25-7-107, Utah Code Annotated 1953
39          25-7-108, Utah Code Annotated 1953
40          25-7-109, Utah Code Annotated 1953
41          25-7-110, Utah Code Annotated 1953
42          25-7-111, Utah Code Annotated 1953
43     REPEALS:
44          25-6-14, as repealed and reenacted by Laws of Utah 2013, Chapter 284
45     

46     Be it enacted by the Legislature of the state of Utah:
47          Section 1. Section 25-7-101 is enacted to read:
48     
CHAPTER 7. UTAH ASSET PROTECTION TRUST ACT

49          25-7-101. Title.
50          This chapter is known as the "Utah Asset Protection Trust Act."
51          Section 2. Section 25-7-102 is enacted to read:
52          25-7-102. Definitions.
53          As used in this chapter:
54          (1) (a) "Asset Protection Trust" means any trust, whether or not administered in Utah,
55     which is registered in accordance with this chapter:
56          (i) in which the settlor is an actual or potential beneficiary; and
57          (ii) which claims a creditor of that settlor may not reach any of its assets that would be
58     available to that creditor under Section 75-7-505.

59          (b) A trust whose assets consist solely of assets which are exempt from the settlor's
60     creditors under Title 78B, Chapter 5, Part 5, Utah Exemptions Act, is not an asset protection
61     trust.
62          (2) "Beneficiary" means a person who has a present interest or, under the terms of the
63     trust, may have a future beneficial interest in a trust, vested or contingent.
64          (3) "Creditor" means a person:
65          (a) whose claim against the settlor arises before the trust is created; or
66          (b) who subsequently becomes a creditor of the settlor, whether or not the claim is
67     reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
68     undisputed, legal, equitable, secured, or unsecured.
69          (4) "Insured or bonded claims" means claims for which the settlor is required by law to
70     be insured or bonded but only to the extent of the required insurance or bond.
71          (5) "Property" means real property, personal property, and interests in real or personal
72     property.
73          (6) "Settlor" means a person who creates a trust and a person who contributes to a trust.
74          (7) "Social welfare program" means any state or federal entitlement program providing
75     benefits to the settlor, the settlor's spouse or dependants including without limitation Medicaid,
76     unemployment, and disability programs.
77          (8) "Trust" means the same as that term is defined in Section 75-1-201.
78          Section 3. Section 25-7-103 is enacted to read:
79          25-7-103. Date of contribution -- Source of expenditure and distribution.
80          For purposes of this chapter:
81          (1) Unless otherwise provided, the date of a contribution to a registered trust is the date
82     it is received by the trust.
83          (2) When a trust is registered, all of the trust assets at the time of registration are
84     considered to be contributed at the time of registration.
85          (3) When a registered settlor is added to a registered trust, all of the trust assets at the
86     time of the addition are considered to be contributed to the trust at the time of the addition.
87          (4) There is a rebuttable presumption that the expenditures and distributions of a
88     registered trust are made from the most recent contributions to the trust and the proceeds from
89     those contributions.

90          Section 4. Section 25-7-104 is enacted to read:
91          25-7-104. Rights of settlor's creditors.
92          (1) A creditor of a settlor of a registered trust has the same rights against the trust and
93     its assets that the creditor would have against an unregistered trust, except as set forth in this
94     chapter.
95          (2) A registered trust may assert exemptions as set forth in this chapter against the
96     collection of the trust's obligations to pay creditors of the registered settlors of the trust. The
97     exemptions may only be asserted to prevent the taking of:
98          (a) contributions to the trust which were made at least four years prior to the date the
99     creditor's claim was first presented to the trust; and
100          (b) proceeds traceable to contributions described in Subsection (2)(a).
101          (3) The exemptions set forth in this chapter may not be asserted against the following
102     claims against a registered settlor:
103          (a) a secured claim but only to the extent of the security held by the trust;
104          (b) child support and alimony obligations;
105          (c) property division under domestic orders;
106          (d) damages caused by the intentional torts of the settlor;
107          (e) court ordered fines, penalties, and criminal restitution;
108          (f) taxes and associated interest and penalties;
109          (g) reimbursement of social welfare programs; and
110          (h) insured or bonded claims.
111          (4) Exemptions set forth in this chapter may not be asserted by a registered trust if any
112     registered settlor is a settlor and beneficiary of any other asset protection trust.
113          Section 5. Section 25-7-105 is enacted to read:
114          25-7-105. Exemptions.
115          (1) A trust registered under this chapter may assert both of the following exemptions
116     against a claim by a creditor of a registered settlor as set forth in Section 25-7-104:
117          (a) The Median Exemption is an amount equal to the sum of the median value of a
118     Utah owner occupied housing unit and the median Utah household income as determined in the
119     most recent American Community Survey conducted by the United States Census Bureau.
120          (b) The 50% Exemption is determined on a claim by claim basis and is an amount

121     equal to the sum of the following reduced by the Median Exemption:
122          (i) the amount available under an insurance policy of which the settlor is an insured to
123     satisfy the creditor's claim against the settlor;
124          (ii) the amount available from surety bonds, property bonds, cash deposited with the
125     court, or any other security approved by the court to satisfy the creditor's claim against the
126     settlor; and
127          (iii) the amount paid to the creditor on the claim by or for the settlor after the claim is
128     presented to the trust.
129          (2) No exemption is available to the trust against the creditors of a registered settlor
130     after the death of that settlor.
131          (3) For purposes of determining these exemptions and the value of trust assets:
132          (a) a Utah primary residence occupied by a settlor shall be valued at its most recent
133     assessed value for property tax, less encumbrances;
134          (b) value for good will may not be given in determining the value of a privately held
135     business; and
136          (c) partial interests in assets that are not publicly traded securities shall be valued as a
137     portion of the whole without discount.
138          (4) The burden shall be on the trust to prove by a preponderance of the evidence that
139     exemptions prevent the taking of a trust asset.
140          Section 6. Section 25-7-106 is enacted to read:
141          25-7-106. Utah Exemptions Act.
142          The assets of a registered trust that are available to the settlor are owned by the settlor
143     for purposes of Title 78B, Chapter 5, Part 5, Utah Exemptions Act. The settlor or the trust may
144     assert the settlor's exemption rights against a claim of the settlor's creditor.
145          Section 7. Section 25-7-107 is enacted to read:
146          25-7-107. Liens and security interests.
147          (1) Liens and security interests which have attached to an asset before it is transferred
148     to a registered trust continue as liens upon and security interests in that asset.
149          (2) A judgment against a registered trust for claims against the registered settlor does
150     not create a lien or security interest in any asset of the trust. Writs of replevin, attachment,
151     garnishment, and execution may be issued against a registered trust to satisfy a judgment.

152          (3) No interest of a registered settlor as beneficiary of a registered trust is subject to
153     voluntary or involuntary transfer even if the registered settlor is the trustee or cotrustee of the
154     registered trust.
155          Section 8. Section 25-7-108 is enacted to read:
156          25-7-108. Trust registration.
157          (1) Any trust may be registered under this chapter.
158          (2) To be registered, a trust shall record all of the following information with the
159     Division of Corporations:
160          (a) the name of the trust, which shall end with the phrase "Asset Protection Trust";
161          (b) the names and addresses of all settlors of the trust whose creditors may be barred
162     from trust assets by the exemptions in this chapter;
163          (c) the names and addresses of all trustees; and
164          (d) the name and a Utah address of a current agent for service of process on the trust.
165          (3) Registered settlors:
166          (a) shall be natural persons over the age of 18;
167          (b) are persons registered with the trust under Subsection (2)(b); and
168          (c) enjoy the protections of this chapter to the extent of their contributions to the trust.
169          Section 9. Section 25-7-109 is enacted to read:
170          25-7-109. Trust registry.
171          (1) Trusts registered in accordance with this chapter shall be listed on a public registry
172     created by the Division of Corporations.
173          (2) The registry shall be capable of reporting the date and information in the initial
174     registration and the date and substance of each subsequent amendment to a trust registration.
175          Section 10. Section 25-7-110 is enacted to read:
176          25-7-110. Fees.
177          Unless otherwise provided by statute, the Division of Corporations shall collect fees for
178     its services in amounts determined by the Department of Commerce in accordance with the
179     provisions of Section 63J-1-504.
180          Section 11. Section 25-7-111 is enacted to read:
181          25-7-111. Provisions for trusts created under former Section 25-6-14.
182          Asset protection trusts created under former Section 25-6-14 may date contributions to

183     the trust, for the purposes of this chapter, four years prior to the date of registration if the trust
184     is registered under the provisions of this chapter before January 1, 2017.
185          Section 12. Section 75-2-205 is amended to read:
186          75-2-205. Decedent's nonprobate transfers to others.
187          Unless excluded under Section 75-2-208, the value of the augmented estate includes the
188     value of the decedent's nonprobate transfers to others, not included under Section 75-2-204, of
189     any of the types described in this section, in the amount provided respectively for each type of
190     transfer:
191          (1) Property owned or owned in substance by the decedent immediately before death
192     that passed outside probate at the decedent's death. Property included under this category
193     consists of the property described in this Subsection (1).
194          (a) (i) Property over which the decedent alone, immediately before death, held a
195     presently exercisable general power of appointment.
196          (ii) The amount included is the value of the property subject to the power, to the extent
197     the property passed at the decedent's death, by exercise, release, lapse, in default, or otherwise,
198     to or for the benefit of any person other than the decedent's estate or surviving spouse.
199          (b) (i) The decedent's fractional interest in property held by the decedent in joint
200     tenancy with the right of survivorship.
201          (ii) The amount included is the value of the decedent's fractional interest, to the extent
202     the fractional interest passed by right of survivorship at the decedent's death to a surviving joint
203     tenant other than the decedent's surviving spouse.
204          (c) (i) The decedent's ownership interest in property or accounts held in POD, TOD, or
205     co-ownership registration with the right of survivorship.
206          (ii) The amount included is the value of the decedent's ownership interest, to the extent
207     the decedent's ownership interest passed at the decedent's death to or for the benefit of any
208     person other than the decedent's estate or surviving spouse.
209          (d) (i) Proceeds of insurance, including accidental death benefits, on the life of the
210     decedent, if the decedent owned the insurance policy immediately before death or if and to the
211     extent the decedent alone and immediately before death held a presently exercisable general
212     power of appointment over the policy or its proceeds.
213          (ii) The amount included:

214          (A) is the value of the proceeds, to the extent they were payable at the decedent's death
215     to or for the benefit of any person other than the decedent's estate or surviving spouse; and
216          (B) may not exceed the greater of the cash surrender value of the policy immediately
217     prior to the death of the decedent or the amount of premiums paid on the policy during the
218     decedent's life.
219          (2) Property transferred in any of the forms described in this Subsection (2) by the
220     decedent during marriage:
221          (a) (i) Any irrevocable transfer in which the decedent retained the right to the
222     possession or enjoyment of, or to the income from, the property if and to the extent the
223     decedent's right terminated at or continued beyond the decedent's death.
224          (ii) [An irrevocable transfer in trust which includes a restriction on transfer of the
225     decedent's interest as settlor and beneficiary as described in Section 25-6-14. (iii)] The amount
226     included is the value of the fraction of the property to which the right or restriction related, to
227     the extent the fraction of the property passed outside probate to or for the benefit of any person
228     other than the decedent's estate or surviving spouse.
229          (b) (i) Any transfer in which the decedent created a power over income or property,
230     exercisable by the decedent alone or in conjunction with any other person, or exercisable by a
231     nonadverse party, to or for the benefit of the decedent, creditors of the decedent, the decedent's
232     estate, or creditors of the decedent's estate.
233          (ii) The amount included with respect to a power over property is the value of the
234     property subject to the power, and the amount included with respect to a power over income is
235     the value of the property that produces or produced the income, to the extent the power in
236     either case was exercisable at the decedent's death to or for the benefit of any person other than
237     the decedent's surviving spouse or to the extent the property passed at the decedent's death, by
238     exercise, release, lapse, in default, or otherwise, to or for the benefit of any person other than
239     the decedent's estate or surviving spouse.
240          (iii) If the power is a power over both income and property and Subsection (2)(b)(ii)
241     produces different amounts, the amount included is the greater amount.
242          (3) Property that passed during marriage and during the two-year period next preceding
243     the decedent's death as a result of a transfer by the decedent if the transfer was of any of the
244     types described in this Subsection (3).

245          (a) (i) Any property that passed as a result of the termination of a right or interest in, or
246     power over, property that would have been included in the augmented estate under Subsection
247     (1)(a), (b), or (c), or under Subsection (2), if the right, interest, or power had not terminated
248     until the decedent's death.
249          (ii) The amount included is the value of the property that would have been included
250     under Subsection (1)(a), (b), (c), or Subsection (2) if the property were valued at the time the
251     right, interest, or power terminated, and is included only to the extent the property passed upon
252     termination to or for the benefit of any person other than the decedent or the decedent's estate,
253     spouse, or surviving spouse.
254          (iii) (A) As used in this Subsection (3)(a), "termination," with respect to a right or
255     interest in property, occurs when the right or interest terminated by the terms of the governing
256     instrument or the decedent transferred or relinquished the right or interest, and, with respect to
257     a power over property, occurs when the power terminated by exercise, release, lapse, default, or
258     otherwise.
259          (B) With respect to a power described in Subsection (1)(a), "termination" occurs when
260     the power terminated by exercise or release, but not otherwise.
261          (b) (i) Any transfer of or relating to an insurance policy on the life of the decedent if
262     the proceeds would have been included in the augmented estate under Subsection (1)(d) had
263     the transfer not occurred.
264          (ii) The amount included:
265          (A) is the value of the insurance proceeds to the extent the proceeds were payable at
266     the decedent's death to or for the benefit of any person other than the decedent's estate or
267     surviving spouse; and
268          (B) may not exceed the greater of the cash surrender value of the policy immediately
269     prior to the death of the decedent or the amount of premiums paid on the policy during the
270     decedent's life.
271          (c) (i) Any transfer of property, to the extent not otherwise included in the augmented
272     estate, made to or for the benefit of a person other than the decedent's surviving spouse.
273          (ii) The amount included is the value of the transferred property to the extent the
274     aggregate transfers to any one donee in either of the two years exceeded $10,000.
275          Section 13. Section 75-7-107 is amended to read:

276          75-7-107. Governing law.
277          (1) For purposes of this section:
278          (a) "Foreign trust" means a trust that is created in another state or country and valid in
279     the state or country in which the trust is created.
280          (b) "State law provision" means a provision that the laws of a named state govern the
281     validity, construction, and administration of a trust.
282          (2) If a trust has a state law provision specifying this state, the validity, construction,
283     and administration of the trust are to be governed by the laws of this state if any administration
284     of the trust is done in this state.
285          (3) For all trusts created on or after December 31, 2003, if a trust does not have a state
286     law provision, the validity, construction, and administration of the trust are to be governed by
287     the laws of this state if the trust is administered in this state.
288          (4) A trust shall be considered to be administered in this state if:
289          (a) the trust states that this state is the place of administration, and any administration
290     of the trust is done in this state; or
291          (b) the place of business where the fiduciary transacts a major portion of its
292     administration of the trust is in this state.
293          [(5) If a foreign trust is administered in this state as provided in this section, the
294     following provisions are effective and enforceable under the laws of this state:]
295          [(a) a provision in the trust that restricts the transfer of trust assets in a manner similar
296     to Section 25-6-14;]
297          [(b) a provision that allows the trust to be perpetual; or]
298          [(c) a provision that is not expressly prohibited by the law of this state.]
299          [(6)] (5) A foreign trust that moves its administration to this state is valid whether or
300     not the trust complied with the laws of this state at the time of the trust's creation or after the
301     trust's creation.
302          [(7)] (6) Unless otherwise designated in the trust instrument, a trust is administered in
303     this state if it meets the requirements of Subsection (4).
304          Section 14. Section 75-7-301 is amended to read:
305          75-7-301. Basic effect.
306          (1) Notice to a person who may represent and bind another person under this part has

307     the same effect as if notice were given directly to the other person.
308          (2) The consent of a person who may represent and bind another person under this part
309     is binding on the person represented unless the person represented objects to the representation
310     before the consent would otherwise have become effective.
311          (3) Except as otherwise provided in [Sections] Section 75-7-411 [and 25-6-14], a
312     person who under this part may represent a settlor who lacks capacity may receive notice and
313     give a binding consent on the settlor's behalf.
314          Section 15. Section 75-7-501 is amended to read:
315          75-7-501. Rights of beneficiary's creditor or assignee.
316          To the extent a beneficiary's interest is not protected by a spendthrift provision or
317     [Section 25-6-14] Title 25, Chapter 7, Utah Asset Protection Trust Act, the court may authorize
318     a creditor or assignee of the beneficiary to reach the beneficiary's interest by attachment of
319     present or future distributions to or for the benefit of the beneficiary or other means. The court
320     may limit the award to relief as is appropriate under the circumstances.
321          Section 16. Section 75-7-505 is amended to read:
322          75-7-505. Creditor's claim against settlor.
323          (1) Whether or not the terms of a trust contain a spendthrift provision, the following
324     rules apply:
325          (a) During the lifetime of the settlor, the property of a revocable trust is subject to the
326     claims of the settlor's creditors. If a trust has more than one settlor, the amount the creditor or
327     assignee of a particular settlor may reach may not exceed the settlor's interest in the portion of
328     the trust attributable to that settlor's contribution.
329          (b) (i) With respect to an irrevocable trust [other than an irrevocable trust that meets
330     the requirements of Section 25-6-14], a creditor or assignee of the settlor may reach the
331     maximum amount that can be distributed to or for the settlor's benefit. If the trust has more
332     than one settlor, the amount the creditor or assignee of a particular settlor may reach may not
333     exceed the settlor's interest in the portion of the trust attributable to that settlor's contribution.
334          (ii) If marital property has been contributed to the trust, property in the trust equal to
335     the value of the marital property and its proceeds is subject to division by a court in a
336     separation or divorce proceeding.
337          (c) After the death of a settlor, and subject to the settlor's right to direct the source from

338     which liabilities will be paid, the property of a trust that was revocable at the settlor's death, but
339     not property received by the trust as a result of the death of the settlor which is otherwise
340     exempt from the claims of the settlor's creditors, is subject to claims of the settlor's creditors,
341     costs of administration of the settlor's estate, the expenses of the settlor's funeral and disposal
342     of remains, and statutory allowances to a surviving spouse and children to the extent the
343     settlor's probate estate is inadequate to satisfy those claims, costs, expenses, and allowances.
344          (2) For purposes of this section:
345          (a) during the period the power may be exercised, the holder of a power of withdrawal
346     is treated in the same manner as the settlor of a revocable trust to the extent of the property
347     subject to the power; and
348          (b) upon the lapse, release, or waiver of the power, the holder is treated as the settlor of
349     the trust only to the extent the value of the property affected by the lapse, release, or waiver
350     exceeds the greater of the amount specified in Subsection 2041(b)(2), 2514(e), or Section
351     2503(b) of the Internal Revenue Code of 1986, in each case as in effect on May 1, 2004.
352          Section 17. Section 75-7-816 is amended to read:
353          75-7-816. Recitals when title to real property is in trust -- Failure.
354          (1) When title to real property is granted to a person as trustee, the terms of the trust
355     may be given either:
356          (a) in the deed of transfer; or
357          (b) in an instrument signed by the grantor and recorded in the same office as the grant
358     to the trustee.
359          (2) If the terms of the trust are not made public as required in Subsection (1), a
360     conveyance from the trustee is absolute in favor of purchasers for value who take the property
361     without notice of the terms of the trust.
362          (3) The terms of the trust recited in the deed of transfer or the instrument recorded
363     under Subsection (1)(b) shall include:
364          (a) the name of the trustee;
365          (b) the address of the trustee; and
366          (c) the name and date of the trust.
367          (4) Any real property titled in a trust which [has a restriction on transfer described in
368     Section 25-6-14] is registered in accordance with the Utah Asset Protection Trust Act, shall

369     include in the title the words "Asset Protection Trust."
370          Section 18. Repealer.
371          This bill repeals:
372          Section 25-6-14, Asset Protection Trust.
373          Section 19. Effective date.
374          This bill takes effect on January 1, 2016.






Legislative Review Note
     as of 2-11-15 9:43 AM


Office of Legislative Research and General Counsel