Why Wyoming?

Wyoming consistently ranks among the most preferred states in the nation in which to form a Private Trust Company. In the last decade, as families and wealth management professionals have begun to focus on the importance of selecting a jurisdiction with a favorable trust climate, Wyoming’s popularity as trust situs has seen remarkable growth. And it’s no wonder. When it comes to Private Trust Companies, there isn’t a one-size-fits-all model. Wyoming is one of only a few top-ranking states that allows for the formation of regulated as well as unregulated Private Trust Companies. This gives us, at Frontier Administrative Services, the widest of latitudes when it comes to helping a family select and form the most appropriate type of Private Trust Company.

Wyoming’s favored status stems from a combination of low taxes, advantageous trust statutes and asset protection laws, and a state legislature that is consistently friendly to and proactive when it comes to wealth-protection. The following points explore Wyoming’s strengths as a trust situs in comparison to other popular jurisdictions:

  • Privacy: Wyoming’s privacy laws completely and perpetually protect annual filing information provided by regulated Private Trust Companies. Furthermore, the state’s corporate law is such that Frontier Administrative Services is able to structure both unregulated and regulated Private Trust Companies to completely shield family names, assets, and other relevant details from the public.
  • Wyoming Tax Benefits: Wyoming imposes no state income or capital gains tax on trusts. Additionally, Wyoming has:
    • No corporate income tax
    • No state gift tax
    • No tax on out-of-state retirement income
    • No excise tax
    • No tax on mineral ownership
    • No intangibles tax
    • Low property tax
    • Low insurance premium taxes (Wyoming: 75 basis points; Nevada: 175 bp, Delaware: 200 bp)
  • Perpetual, Multigenerational Dynasty Trust: A properly-formed Wyoming Private Trust Company exists outside the federal transfer tax system, meaning during the life of the trust, gift, estate, and generation skipping taxes do not apply. Currently, a number of states including South Dakota and Delaware allow a trust to exist indefinitely. Wyoming has enacted a 1,000 year limit on multigenerational trusts. For a number of years, advisors differentiated between the two types of states. The most recent stance, however, is that there is no practical difference between states that allow for perpetual trusts and those like Wyoming.
  • Wyoming Allows Both Regulated and Unregulated Private Trust Companies: Wyoming is one of only a few top-rated trust situs states that allow for the formation of unregulated as well as regulated private trust companies, both of which offer a high degree of protection and privacy. Which type of entity better meets a family’s needs depends on a number of factors:
    • Unregulated:
      • Exempt from regulation normally required of an entity formed to offer trustee services to the public at large
      • Quick and inexpensive to establish
      • No reporting requirements or attendant formalities
      • No minimum capital investment
      • Cannot operate interstate offices
      • Exempt from regulation by Securities and Exchange Commission if structured to qualify for Family Office exemption
    • Regulated:
      • Many required formalities: capital investment, annual state audits, policy and procedures manuals and compliance, etc.
      • Requires a capital investment of at least $500,000 (South Dakota requires $200,000; Delaware requires $1,000,000)
      • More costly and time-intensive to set up and administrate
      • Able to consolidate several common trusts
      • Permit use of the investment advisor exemption
      • Exempt from registration with the Securities and Exchange Commission
    • Among the other top-rated trust states, South Dakota allows regulated Private Trust Companies as does Delaware which caters to institutional Private Trust Companies. Nevada, New Hampshire, and Wyoming allow both regulated and unregulated entities.
    • Most families establishing Private Trust Companies in Wyoming opt for the unregulated version because they are cost effective, easy to set up and administer, require little year-to-year reporting, and provide the greatest flexibility in terms of family control and structure. That said, there are situations that call for the regulated option. Frontier Administrative Services is well versed in the creation and maintenance of both.
  • Modern Trust Laws: Wyoming has taken a proactive approach to protecting its trust-friendly climate by developing a strong set of modern trust laws. These statutory provisions allow for increased flexibility in the management, amendment, and reformation of trusts.
    • Directed Trust Statutes and Special Purpose Entities: These laws allow a family to appoint an independent party to manage trust assets, thereby relieving the trustee from management decision liability and allowing existing family advisors to make sensitive decisions regarding trust assets.
      • Five jurisdictions currently permit special purpose entities: Alaska, Delaware, Nevada, South Dakota, and Wyoming.
    • Trust Protector Statutes: A trust protector is a disinterested third party appointed by the trust and given powers which may include the ability to modify some trust terms as the needs of future generations, tax status, or governing law change.
      • Six jurisdictions have effective Trust Protector lawsĂ‘Alaska, Delaware, Idaho, Nevada, New Hampshire, South Dakota, and Wyoming.
    • Reformation and Decanting Statutes: In Wyoming, the terms of an irrevocable trust are not necessarily set in stone. With the adoption of the Uniform Trust Code (UTC), Wyoming and a handful of other states allow a trustee or beneficiary to modify a trust with or without a court order.
    • Virtual Representative Statutes: These statutes clarify trust administration issues when there are contingent, unborn, on unascertainable beneficiaries.
  • Asset Protection Legislation: Under Wyoming law, Frontier Administrative Services is able to structure trusts and Private Trust Companies so that the assets they hold are substantially protected from the reach of creditors. Asset protection legislation varies widely from state to state. Wyoming’s laws are advantageous in several respects:
    • Qualified Spendthrift Trust: A Wyoming Qualified Spendthrift Trust, which is a domestic asset protection trust located in Wyoming, can provide creditor protection and accomplish other estate planning objectives without going overseas. By statute, Wyoming is able to provide protection for discretionary as well as mandatory distributions.
    • Self-Settled Trusts: Wyoming is one of six highly-ranked trust jurisdictions that allow self-settled trusts by statute. Such trusts are a type of spendthrift trust formed by settlors for their own benefit to provide asset protection as well as achieve other estate planning objectives.
    • Discretionary Trusts: Wyoming statutes give clear definitional guidance regarding discretionary trusts and, absent an abuse of discretion, prevent creditors from compelling discretionary distributions.
    • Charging Order Protection: Under these statutes, a creditor is only able to attach a right to distribution in a trust, not all the rights a debtor may have in a Family Limited Partnership (FLP) or LLC. This means the debtor’s voting rights are not affected, and consequently, the creditor has no way to force a distribution. As long as the client can out-last the creditor, it is likely the creditor will settle for less. Wyoming has sole remedy charging order protection for LLCs and FLPs, plus additional asset protection features for FLPs.