Why Choose A Wyoming Trust Company?
STEP Journal, Volume 21, Issue 6, June 2013 Christopher M Reimer and Amy M Staehr discuss Wyoming’s trust-friendly laws
Christopher M Reimer is a Partner and Amy M Staehr is an Associate with Long Reimer Winegar Beppler LLP, Jackson, Wyoming.
Escalating tax and reporting pressures on US and non-US trusts alike are forcing wealth planners to take a closer look at US jurisdictions with an eye to advising their clients to settle trusts in a particular state or consider domesticating non-US trusts. Under such scrutiny, trust laws in some states are holding up well, proving that the best ‘off shore’ jurisdictions may be onshore. For decades, locales such as the Cook Islands, Nevis and the Channel Islands captured the interest and the assets of high-net-worth clients by drafting statutory trust provisions that enhanced asset protection, allowed self-settled trusts, repealed the rule against perpetuities and implemented additional useful rules – none of which went unnoticed by US jurisdictions. As a result, a handful of US states have adopted similarly flexible and protective laws.
Julie Gilbert, Vice Chair of STEP Wyoming and President of Jackson Hole Trust Company, notes the explosion of interest in Wyoming in the past few years: ‘The increase in taxes imposed by various US states – California, for example – as well as the Foreign Account Tax Compliance Act burdens on foreign trusts with US beneficiaries, have caused clients to ask their advisors difficult questions about what to do. And this has forced those advisors to start looking to places like Wyoming – no state tax, trust-friendly laws and jaw-dropping scenery are hard to beat.’
Wyoming imposes no state income tax. This tax-free zone encompasses trust income, capital gains, individual as well as corporate income, gifts, out-of-state retirement income, mineral ownership and intangibles. The state’s laws governing trusts are equally friendly: Wyoming authorises self-settled asset-protection trusts, 1,000-year dynasty trusts, directed trusts, purpose trusts, trust protectors and unregulated private trust companies.
New legislation has enhanced the flexibility of Wyoming’s law and highlights the state legislature’s responsive pro-business and prowealth posture. Taking effect in July 2013, Wyoming trust law revisions include:
streamlined ‘qualified beneficiary’ rules with respect to consent and notice;
confirmation that no separate perpetuities law limits the duration of non-charitable purpose trusts;
additional powers a settlor can retain without threatening the irrevocable status of a self-settled asset-protection trust, known as a qualified spendthrift trust (QST), including allowing reimbursement of income taxes attributable to the trust;
narrower exceptions to transfers into QSTs;
clear and convincing standard of judicial review applicable to whether a transfer to a QST violates the Uniform Fraudulent Transfer Act;
a new form of self-settled asset protection trust that provides creditor protection with no creditor exceptions so long as a regulated financial institution serves as trustee; and
a new procedure to force a ‘will contest’ before death.
As important as it is to fully vet the trust and tax climate of a particular jurisdiction, that jurisdiction’s fiscal health and stability are equally vital. While a locale may have favourable laws and a tax-free environment today, the continuing economic crisis has taught prudent planners that a jurisdiction’s future must be evaluated alongside its present. Wyoming is considered ‘America’s Wealth Friendliest State’, the state ‘Most Favorable for Businesses’, the ‘Best-Run State in the Nation’ and the ‘Tax-Friendliest State’. It has a well-deserved reputation among the business-savvy; it is consistently rated in the top tier of fiscally sound state governments and boasts Standard & Poor’s AAA rating, the highest credit rating possible. In addition, Teton County, home to the Yellowstone and Grand Teton national parks, contains a high concentration of the wealthiest US residents, according to the US Internal Revenue Service’s annual compilation of average income per county.
Wyoming’s rainy-day fund represents 47.6 per cent of the state’s 2012 spending, and its mineral trust fund weighs in at over USD5 billion. Alaska is perhaps the only other trust-friendly state that is as fiscally healthy as Wyoming. Both states owe the prowess of their bank accounts to natural resources. Through responsible saving, Wyoming has gathered enough to ride out future downturns.
In addition, while any tax law is subject to change, the future imposition of a Wyoming income tax is unlikely, due to the state’s mineral wealth and the requirement of the Wyoming Constitution that any income tax liability be o set by sales, use and property taxes – enough of a safeguard that its tax-free status is likely to last for many years.