Benefits of Wyoming as a Trust Situs
| Jurisdiction | Wyoming,United States |
| Citation | Vol. 45 No. 6 Pg. 32 |
| Pages | 32 |
| Publication year | 2022 |
Stefanie M. Milam and Kyle D. Barrett
Wyoming consistently ranks as one of the best trust situs jurisdictions in the country. Wyoming has no state estate or inheritance taxes and no state income, capital gains, or intangibles taxes on individuals, corporations or trusts.
The Wyoming Constitution contains strong restrictions on income tax, including a full credit against an income tax for all sales, use and ad valorem taxes.[1] The state historically avoids significant budget shortfalls and quickly recovers from recessions to return to a budget surplus.[2] Wyoming's rainy-day accounts are healthy,[3] second only to Alaska, and its unemployment numbers are low compared to the national average.[4]
These attributes make Wyoming an attractive situs for trusts, and Wyoming statutes clearly provide how to lawfully bring these trusts to Wyoming. Practitioners should encourage clients to continue forming trusts in Wyoming to bolster the economy and bring jobs to the state. This article discusses several major benefits of Wyoming as a trust situs.
Flexible and Innovative Trust Code
Thirty-six states have enacted a Uniform Trust Code (UTC) to date.[5] The Wyoming Uniform Trust Code[6]was adopted in 2003 and has been amended repeatedly to keep Wyoming as one of the most attractive locations for trusts. Some of the provisions of the flexible and innovative Wyoming trust code are described below.
Non-Judicial Settlement Agreements. Although most states that have enacted the Uniform Trust Code have statutes permitting the use of non-judicial settlement agreements (NJSAs) to interpret or modify a trust, the Wyoming NJSA statute is broader and more effective. Many states with a NJSA statute require the consent of any and all potential beneficiaries of a trust to modify a trust. The Wyoming statute only requires the consent of the qualified beneficiaries, the settlor (if living) and the trustee.[7] Wyoming NJSAs can be used for any matter involving trusts that a judge could decide in court, except if the modification violates a material purpose of the trust.[8] The agreements can also be used to convert a trust to a creditor protection qualified spendthrift trust.[9]
Tenancy by the Entirety. When a husband and wife own property jointly as tenants by the entirety, a creditor of one spouse cannot place a lien or enforce a judgment against property held in tenancy by the entirety.[10] The Wyoming UTC allows tenancy by the entirety creditor protection to continue when property is conveyed to joint or separate trusts of a husband and wife.[11] This solves the dilemma of either keeping a home outside of a trust to maintain tenants by entirety protection or losing creditor protection when conveying a home to a trust to avoid probate.
Creditor Claims. The Wyoming UTC provides better creditor protection for trust beneficiaries than many other states. For Wyoming's self-settled discretionary trust, the creditor protection built into the trust is independent of the typical spendthrift provision.[12] Additionally, trust property subject to a power of appointment or withdrawal is not available to creditors unless the beneficiary with the power exercises the power of appointment or withdrawal.[13] This provision is unique to Wyoming. Also, the beneficiary of a discretionary distribution has no property interest or right to force a distribution from the trust; therefore, the beneficiary's creditor cannot obtain an order requiring the beneficiary to obtain a distribution.[14]
The Wyoming UTC, and fewer than ten other states, permits silent trusts, which generally are trusts in which the settlor waives or limits a trustee's duty to inform the beneficiaries of the existence of and other information regarding a trust.
Silent Trusts. The Wyoming UTC, and fewer than ten other states,[15] permits silent trusts, which generally are trusts in which the settlor waives or limits a trustee's duty to inform the beneficiaries of the existence of and other information regarding a trust. Wyoming specifically provides that giving notices to qualified beneficiaries while the settlor is alive requires the consent of the settlor and giving notices to qualified beneficiaries after the settlor's death is not allowed if the terms of the trust so specify.[16]
Sealing of Court Documents. Upon commencement of any proceeding concerning a trust, the Wyoming UTC provides the trust instrument and other trust documents, such as annual reports and inventories, shall be sealed so that they are kept private and are not part of the public record.[17] The sealed...
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