Wyoming: The Lesser-Known Trust Situs

By Alison G. Westbrook Regional Team Lead, First Republic Trust Company of Delaware
December 26, 2019

Wyoming’s lack of income taxes, strong asset protection laws and allowance for private family trust companies are quickly elevating it as one of top trust situs states in terms of attracting new business. The following are some of the unique aspects of Wyoming trust law.

Dynasty Trusts

A dynasty trust is a trust that has the ability to last for multiple generations, often in perpetuity. Wyoming statutes allow for trusts that last 1,000 years. Using a dynasty trust, families can pass assets down to succeeding generations free of estate and generation-skipping transfer tax. A dynasty trust may also be a directed trust.

Directed Trusts

A directed trust is a trust in which an advisor is named to direct the administrative trustee as to investments and/or distributions to beneficiaries. Wyoming law allows for this bifurcation of trustee duties. In a directed trust, the responsibility for investment, distribution or other administrative decisions is vested in one or more advisors, as appointed in the trust agreement. For example, a trust could name the grantor’s sibling as the investment advisor, who could direct the trustee to hold shares in the grantor’s closely held business. In a traditional trust, this type of investment would not be acceptable to a corporate trustee. Other types of advisors can be appointed in situations where the terms of the trust stipulate that a beneficiary comply with certain requirements (i.e., remaining free of drugs or alcohol) in order to receive trust distributions. These distribution advisors may be in a better position to monitor or track these types of requirements if they are familiar with the beneficiary and his circumstances, while corporate discretionary trustees usually are not.

State Income Tax Advantage

Wyoming residents are not required to pay state income or capital gains taxes. This benefit extends to non-residents accumulating income and realizing gains in an irrevocable trust. If a client funds a Wyoming trust with shares of low basis stock or an interest in a closely held company prior to a liquidity event, no state capital gains tax is assessed when the shares are sold. Wyoming also has no gift or inheritance tax, no corporate income tax and low insurance premium tax, further enhancing planning opportunities.

Although an analysis of how the client’s state of residence will treat the income and capital gains of a Wyoming trust is essential, this unique advantage can serve as a powerful tax planning tool.

Creditor Protection

Spendthrift provisions in Wyoming trusts are strictly enforced and can provide trust beneficiaries substantial protection from creditor claims.

Beneficiary Statement Waivers

Most states require trustees to send periodic statements to beneficiaries regardless of the trust language. In Wyoming, a trust grantor can waive all beneficiary notice requirements, essentially keeping the beneficiaries unaware of the assets held in trust.

Flexibility

Beneficiaries and trustees often desire to alter trust provisions to account for changing family circumstances and to take advantage of estate planning opportunities. Wyoming trusts may be modified using a non-judicial settlement agreement, often without the need for court approval. In addition, Wyoming’s decanting statute lends ease to trust reformation and migration.

Private Family Trust Companies

Wyoming is one of the few states that authorize both regulated and unregulated private trust companies that serve a single family.

Privacy

Wyoming trust details are not part of the public record. The names of grantors, beneficiaries and details regarding trust investments remain private.

Although Wyoming is a lesser-known trust situs, it has been quietly revising its statutes to compete with top-tier trust jurisdictions and is quickly emerging as a leader in modern-day wealth management.

Trust and Fiduciary Services are offered through First Republic Trust Company, a division of First Republic Bank; and First Republic Trust Company of Delaware LLC and First Republic Trust Company of Wyoming LLC, both wholly owned subsidiaries of First Republic Bank.

The information provided is for illustration purposes only and should not be construed as legal or tax advice. First Republic does not provide tax or legal advice. Clients should consult their own attorneys or tax advisors for advice.