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Summary Of The Wyoming Incomplete Gift Non-Grantor Trust (WING)

Wyoming Asset Protection Trust-Trust Attorney


A “WING” is a Wyoming domiciled, incomplete gift, non-grantor trust. These trusts are used to isolate income tax liabilities away from the grantor of the trust, but not to exclude the WING’s assets from the grantor’s estate and concomitant excise tax at death.

The non-grantor portion requires the avoidance of the grantor trust provisions of the Internal Revenue Code (“IRC”), those being Subpart E, IRC §§671-679. A WING is typically established by a grantor who has exhausted his or her unified transfer tax credit and needs to fund the WING with an “incomplete gift” so as to avoid the imposition of gift taxes. Subtitle B, IRC §§2001-2801.

The purpose of a WING is state income tax reduction, i.e., to move income from a high-income tax state, e.g., California and New York to a no tax state, e.g., Wyoming. The grantor typically establishes these trusts after exhausting his or her unified transfer tax credit.

To accomplish the desired results, the transaction must be carefully structured to meet all the following requirements:

  1. The trust must be created in a state that does not tax trust income;
  2. The income from the trust must not be taxable by the grantor’s home state;
  3. The trust must allow discretionary distributions to the settlor without making the trust a grantor trust; and
  4. Transfers to the trust must be incomplete gifts for federal gift tax purposes without making the trust a grantor trust.
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Non-Grantor Trusts and Discretionary Distributions


The WING’s trustee must be given the power to make discretionary distributions to you of trust income without making the WING a grantor trust since IRC §671 will then include all trust income on your Form 1040. In this respect the “spousal attribution rules” apply and you cannot give your spouse powers which if you held the power, would cause grantor trust status.

The IRS has continued to rule that a WING may qualify as a non-grantor trust if the trust is structured as follows with respect to distributions:

  • You create an irrevocable trust of which you and your issue are discretionary beneficiaries.
  • You engage a corporate trustee (or establish a private trust company) in a tax friendly state that is required to distribute income or principal at the discretion of a distribution committee or principal on your direction.
  • The distribution committee consists of you and your children, and must maintain at least two “eligible individuals” on the distribution committee members at all times.

Three alternative methods are required for distribution directions:

  1. Grantor consent power – distribute income or principal upon direction of a majority of the distribution committee members with your written consent.
  2. Unanimous member power – distribute income or principal upon direction by all distribution committee members (other than you).
  3. Grantor’s sole power – distribute principal (not income) to any of your issue, but not you, upon your direction in a non-fiduciary capacity to provide for the health, maintenance, support and education of your issue. Distributions may be directed in an unequal manner among potential beneficiaries.

A significant feature of these rulings is that you may be a beneficiary if distributions are solely within the control of a distribution committee, all of whom have adverse financial interests, as defined in IRC §672(c) and you do not vote on distributions to yourself, other than as provided below; thus, all members of the committee must be beneficiaries and the committee must be a shrinking committee that can never be allowed to decline below two members, not including yourself. If it does, only one member would remain and there would be no substantial adverse party interest. (PLR 200247013 (Aug. 14, 2002); PLR 200612002 (Mar. 24, 2006); PLR 200502014 (Jan. 14, 2005); PLR 200148028 (Nov. 30, 2001).

No member on the distribution committee may be a fiduciary.

PLRs 201410001-201410010 (released March 7, 2014) approved guardians acting on behalf of minors on the distribution committee.

Incomplete Gift

You must retain enough control over the WING’s assets to avoid making a completed gift and the imposition of a gift tax, all without creating a grantor trust. This may be accomplished by:

  1. your maintaining a testamentary and lifetime special power of appointment; and
  2. requiring the consent of a distribution committee for any distributions to you.

The testamentary special power of appointment makes the gift to your WING an incomplete gift and the consent requirements avoid grantor trust status.

State Tax Issues

In California Franchise Tax Board Technical Advice Memorandum 2006-0002 (2/17/06), the California Franchise Tax Board stated that if a non-California trustee could make distributions in the trustee’s discretion to a California beneficiary without subjecting the undistributed income to California tax. There are exceptions:

  • If your WING is a “grantor trust” under IRC §§671-677 for federal income tax purposes, the state of your residency will tax all trust income directly to you as the grantor.
  • The WING’s “state source income,” i.e., income that comes from your state of residence is subject to income tax in that state, including income from real property, tangible personal property or business property located in your state.
  • The WING’s non-state sourced income may be subject to income tax in your state of residency if there are either state resident trustees or there are non-contingent beneficiaries residing in your state of residence.

Your WING must provide that each beneficiary’s interest is subject to the sole and absolute discretion of the trustee and, therefore, is a contingent interest in the trust. There are no income accumulation provisions in your WING.

Your WING is a Wyoming, non-grantor trust, with a Wyoming domiciled trustee and there are no non-contingent beneficiaries. This avoids the first and third designations, above. You will, however, have to pay income tax on income generated in your state.


Your WING has been established to accomplish an incomplete gift to a non-grantor trust with contingent beneficiaries to eliminate state income tax.