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The Utah Supreme Court, on January 30, 2015, issued its opinion on this topic in the case of Dahl v. Dahl. The case involved a husband in Utah who created a Nevada self-settled spendthrift trust. His wife was a beneficiary, but “wife” was defined as the person to whom he was married at the time the reference to “wife” was to be applied. When he later filed for divorce, the ex-wife attempted to reach the trust assets in the divorce action, although by the trust’s definition, she was no longer a beneficiary of the trust. In the lower district court, the court ruled that the trust assets were unreachable by the ex-wife. The Utah Supreme Court, however, decided to the contrary on a number of issues, ruling that under Utah law the ex-wife had the legal authority to pursue the Nevada trust assets.

Specifically, the court found that since Utah has a strong public policy in the equitable division of marital assets in a divorce, the forum Utah court will apply (under Utah’s choice of law principles) Utah law (as opposed to the Nevada law that was referenced at the district court level).

Secondly, the court held that the trust agreement expressly granted the “settlor” (i.e., the person(s) who contributed assets to the trust) the power to amend or alter any provision in the trust, which the court found to be tantamount to a power to revoke the trust at any time. Under Utah law, having such a provision in the trust instrument of course makes the trust revocable, which has the effect of negating any protections for the trust assets.

Furthermore, since marital assets were contributed to the trust, this was evidence that the ex-spouse was also a “settlor” (even though not specifically named as a settlor in the trust instrument). She had conveyed her interest in the marital residence to the trust and she stated that she contributed other assets as well. Therefore, as a “settlor,” the court concluded that she also has the power to revoke the trust under the express terms of the trust, generally to the extent of any assets she contributed.

This is therefore a “victory” for the ex-wife. Whether the victory will be fruitful depends on whether she is now able to enforce this Utah judgment against the Nevada trustees or the property held in the Nevada trust. Will a Nevada court give “full faith and credit” to Utah’s judgment and require the trustees to turn over assets? If instead, the trust had been created in an offshore jurisdiction that does not recognize U.S. divorce judgments, the ex-spouse would likely have had an even more difficult time enforcing the judgment against the offshore trustees, especially if the trust assets are also located in a protective locale.

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