Utah Supreme Court
Can Utah spouses shield marital property from divorce by placing it in irrevocable trusts? Dahl v. Dahl Explained
Summary
Dr. Charles Dahl and Kim Dahl divorced after an 18-year marriage involving complex trust and property issues. The case consolidated two actions: the divorce proceeding and a separate trust action where Kim Dahl sought to establish her rights in the Dahl Family Irrevocable Trust containing marital property.
Practice Areas & Topics
Analysis
In Dahl v. Dahl, the Utah Supreme Court addressed whether spouses can protect marital assets from equitable distribution by placing them in supposedly “irrevocable” trusts. The case provides crucial guidance for family law practitioners dealing with complex marital estates involving trust structures.
Background and Facts
During their 18-year marriage, Dr. Charles Dahl and Kim Dahl accumulated substantial marital assets. Dr. Dahl created the “Dahl Family Irrevocable Trust” and funded it with marital property, including contributions from Kim Dahl. The trust agreement contained a choice-of-law provision selecting Nevada law and declared the trust “irrevocable,” but simultaneously reserved for Dr. Dahl “any power whatsoever to alter or amend any of the terms or provisions hereof.” When the couple divorced, Kim Dahl sought her share of trust assets, while Dr. Dahl argued the trust was irrevocable and beyond the court’s reach.
Key Legal Issues
The court addressed several critical questions: whether Utah’s strong public policy favoring equitable distribution of marital assets should override the trust’s Nevada choice-of-law provision; whether a trust declaring itself “irrevocable” while reserving unrestricted amendment powers is actually revocable; and what rights a spouse has in trust property when she contributes marital assets but is not named as a settlor.
Court’s Analysis and Holding
The court refused to enforce the trust’s Nevada choice-of-law provision, holding that Utah’s “strong public policy interest in the equitable division of marital assets” required application of Utah law. Under Utah law, the court found the trust revocable because Dr. Dahl’s unrestricted power to amend included the power to revoke the trust entirely. Citing In re Estate of Flake, the court explained that “an unrestricted power to amend a trust includes, by definition, the power to revoke the trust.” Additionally, the court held that Kim Dahl remained a settlor of the trust despite not being named as such, because she contributed property to it. As a settlor, she could revoke the trust regarding her contributions under Utah Code section 75-7-605(2).
Practice Implications
This decision establishes that Utah courts will not allow spouses to circumvent equitable distribution by placing marital assets in trusts. Practitioners should ensure that all trusts containing marital property are joined as parties to divorce actions to enable complete asset distribution. The case also demonstrates the importance of carefully drafting trust provisions—contradictory language declaring a trust “irrevocable” while reserving broad amendment powers will render the trust revocable. Finally, the decision reinforces that Utah’s public policy favoring equitable distribution may override choice-of-law provisions that would frustrate fair property division.
Case Details
Case Name
Dahl v. Dahl
Citation
2015 UT 79
Court
Utah Supreme Court
Case Number
Nos. 20100683, 20111077
Date Decided
August 27, 2015
Outcome
Affirmed in part and Reversed in part
Holding
A trust is revocable under Utah law when the settlor reserves an unrestricted power to amend, and a spouse who contributes marital property to such a trust retains settlor status and may revoke the trust as to her contribution.
Standard of Review
Summary judgment reviewed for correctness; alimony determinations reviewed for abuse of discretion; evidentiary rulings reviewed for abuse of discretion; property distribution reviewed for abuse of discretion; factual findings reviewed for clear error
Practice Tip
Always join trusts containing marital property as parties to divorce actions to ensure complete distribution of the marital estate and avoid bifurcated litigation.
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