Hey Utah, No RAP Secrets? *
I caught a bit of that President Obama question and answer session about a month ago with the Republicans. At one point a Congressman from Utah asked some detailed questions. The words ‘trust’ and ‘transparency’ were part of the exchange. I remembered that the Congressman’s name started with the letter C; his name turned out to be Jason Chaffetz. After some research, I also learned he was the half-brother of John Dukakis – the offspring of Kitty Dukakis and her first husband. According to Wikipedia, Chaffetz is a former BYU placekicker of note who converted to being a Morman in college. He ran the Dukakis campaign in Utah in 1988 but converted to being a Republican in 1990. I was left wondering whether he is the Utah version of Scott Brown. Chaffetz ran, in 2008, against an incumbent Republican who had support from very prominent Republicans. Number one campaign contributor for both Brown and Chaffetz was the financial industry. Anyway his questions were fair enough.
At the same time, I just happened to be researching the expansion and elimination of the Rule against Perpetuities (RAP) that some states have enacted in recent years. For example, states like South Dakota, Colorado, Wyoming, Nevada, and Utah; big chunk of real estate there. Usually states indicate that they are trying to attract financial assets to their states but there are also real property issues. Banks or the financial entities involved do increase their revenues so that is also a big factor. One article that caught my attention was this one touting the benefits of setting up a trust in Utah.
What is most interesting to me is that confidentiality benefit. No actual public filing or accounting required. Perhaps, the bank or financial entity sends an information return to the IRS. But then is it totally confidential? While I realize that no one living in Utah would ever cheat on their tax returns; Utah law does appear to set-up this possibility for Utah residents and others if the information return is not filed. How will Utah know where financial assets are coming from with the confidentiality feature in place? Also helping individuals safeguard assets from creditors and ex-spouses from other states does not sound like a very noble form of business activity. I know that some other states also allow for this type of business activity but I do wonder what would happen if all states had similar laws.
As important, I have to wonder since Utah allows “secret” trusts whether this might contribute to illegal or discriminatory acts is some way. Even if names and other information are required for real estate, I wonder whether there are ways around that to keep an owner’s identity secret. I just happened today to come across the facts related to the Tea Pot Dome Scandal; it took Congress quite some time to untangle what went on there. So similar sorts of things do happen. Is property being locked-up in perpetuity for the benefit of some family or group? I notice that Utah allows up to 1000 years. To me that might as well be forever. These long term trusts are generally labeled as perpetual trusts as opposed to dynasty trusts which are established using the estate tax exemption (or generation skipping transfer tax exemption amount if you prefer).
I notice that Utah statutes allow Asset Protection Trusts from this article on the internet.
Utah is one of those states trying to take that business away from the Cook Islands, Nevis and Belize. USA,USA,USA!!! It is unfortunate that Utah is only 2 time zones away from the East Coast. Alaska has you beat there.
What with the lapse of the Estate Tax and Generation Skipping Transfer Tax (rate 45%- 55%) the door has been opened up for all sorts of extreme wealth planning. More than “conservation” easement trusts are possible. They could be just about anything. Is preserving a hog farm in perpetuity an act of conservation? I saw that question in an article discussing conservation easement in Colorado. So maybe somebody out there in the media might inquire of Congressman Chaffetz or Senator Hatch, who is very knowledgeable about legal matters, about the need for confidentiality.
States such as Florida, Delaware, and perhaps Nevada are known for these sorts of laws. But Utah, I am surprised that you would want to be involved. In conclusion, Utah you appear to have various types of trusts which could benefit from some sunlight. You might want to do something about that. In the meantime, I am not sure that most people should trust you.
Sorry Utah, but in the interest of transparency I felt it necessary to raise some questions. In the words of Woody Guthrie, this land is your land but it is also my land.
revised March 2010