By The Wyoming LLC Attorney Team
May 09, 2021One of the principal benefits of Wyoming Trust law in the context of an Asset Protection Trust (“DAPT”) is the use of a Wyoming Private Trust Company (“PTC”) as a Trustee. The PTC is registered with the Wyoming Banking Commission but is not regulated because of an exemption for Trustees acting for a single “family.” This allows the settlors of the DAPT to maintain substantial management and control over the workings of the DAPT. Control through “Directed Trusts” is also allowed by Wyoming and this further enhances the use of a DAPT. This factor, control, is unique to Wyoming and has been instrumental in establishing Wyoming as a preeminent Trust jurisdiction.
In addition to control, confidentiality for the PTC is a paramount issue. In this instance the formation of the Trustee as a PTC in Wyoming is anonymous. An additional level of protection is attained by establishing a Non-Charitable Special Purpose Trust (“NCSP”) solely for the purpose of owning the membership interests in the PTC and providing further oversight to the DAPT. There are no registration or disclosure requirements for an NCSP in Wyoming. The ownership of the PTC is anonymous. The use of the NCSP for ownership of the PTC immunizes the PTC from an attack on the settlors of the DAPT because the NCSP owns the outstanding PTC membership interest and the settlor is not a beneficiary of the DAPT. Thus, the settlor has no property interest in either the PTC or the NCSP.
An NCSP is in this instance an unconventional Trust in that it is formed to hold the PTC membership interest but has no beneficiary. A Trust protector or enforcer is appointed to oversee the activities of the PTC. The Grantors have no interest in the NCSP.
There are three requirements under the common law of Trusts for a valid Trust. First, a Trustee, second, Trust property and third, an ascertainable beneficiary. RESTATEMENT (SECOND) OF TRUSTS §124 (AM. LAW INST. 1959). A statutory exception has been created in Wyoming for the third requirement in order to allow for the creation of an NCSP to hold the membership interest of the PTC, which acts as the Trustee of your DAPT. (W.S. §§4-10-410 and 4-10-504.)
We recommended that you appoint a Trust protector or enforcer with powers to enforce the purpose of the NCSP. The following should be considered in organizing your NCSP:
The PTC, then, is privately owned by the NCSP and acts as a Trustee exclusively for a wealthy Family Trust or group of Trusts. The PTC board would be populated with professional advisors and family members. The PTC is generally at the heart of the “Family Office.” There are a number of advantages:
These factors allow the PTC to deal with sensitive family issues more freely and with greater speed and flexibility.
One final factor to consider is that professional Trustees are generally reluctant to take ownership of assets or participate in ventures where substantial risks may be present. A PTC with proper board composition allows for riskier investments to be included in the Trust fund since the assessment will be based on a broader scope of experience from a properly constituted board.
Wyoming is one of the few states that through its regulatory board has allowed PTCs to be totally unregulated. This can be a substantial benefit for the following reasons:
On the federal side, the IRS issued Notice 2008-63 in 2008 to guide the PTC’s structure:
The PTC can be a Trustee for your DAPT if it complies with Wyoming law by providing the following: (i) a Wyoming LLC owned by (ii) a Wyoming DAPT administered by (iii) a Wyoming PTC.
The family office is established to manage a family’s financial and personal needs through a long-term vision of wealth management and the pages of values to future generations. Many families have diversified private fortunes accumulated over many years, which presents a level of complexity and complicated family situations.
The family office centralizes management within a private, professionally staffed, tax-efficient structure, with defined decision-making and reporting lines. The staff are professional and committed to acting in the family’s best interests without conflicts of interest. A professional staff assists in solving problems by acting as impartial guides and a source of reliable and dispassionate advice while nurturing junior members of the family to gradually take a more active role in the family’s affairs.
The legal structure of the family office depends on many factors:
A Non-Charitable Special Purpose Trust is essential in specific situations.
Wyoming's unique Trust laws offer significant advantages for Asset Protection Trusts (DAPTs), particularly when utilizing a Wyoming Private Trust Company (PTC) and a Non-Charitable Special Purpose Trust (NCSP). These structures provide unparalleled control and confidentiality for settlors, allowing for effective oversight of DAPTs. Considering the complexities involved, consulting with an experienced estate planning attorney is advisable for those seeking to maximize the benefits of these Trust arrangements.