In our discussion on both Wyoming Qualified Spendthrift Trusts and Wyoming Domestic Asset Protection Trusts, I explained that you need the services of a qualified trustee. The term “qualified trustee” is defined under Wyoming law as (i) any individual who resides in Wyoming or (ii) a person or entity authorized under Wyoming law to act as a trustee if that person or entity:[1]
- Maintains or arranges for custody in Wyoming of some or all of the qualified trust property;
- Maintains records for the QST on an exclusive or nonexclusive basis;
- Prepares or arranges for the preparation of fiduciary income tax returns for the QST; or
- Otherwise materially participates in the administration of the QST.
What type of entity is authorized to act as a trustee? Under Wyoming law, there are three categories of entities that may lawfully act as trustees:
- Regulated Public Trust Company: This is a type of company that is licensed and regulated much like a bank[2] They normally require awesome amounts of capital, although Wyoming only requires $500,000 of capital.[3] Directors and officers are subject to rigorous background checks and must be approved based on their qualifications and experience by banking regulators. Essentially, you are not going to do this.
- Chartered Family Trust Company: Wyoming has historically permitted regulated private trust companies to act as trustees for trusts established by family members. In 2015, Wyoming substantially replaced its regulated private trust company rules with the Wyoming Chartered Family Trust Company Act.[4] Like a regulated public trust company, a Wyoming Chartered Family Trust Company must be capitalized with $500,000,[5] and is licensed and regulated by the state government in Wyoming. Why would you consider this route? If your family has substantial wealth spread among a number of family members seeking to conserve on wealth management fees, this is a cost-effective way to consolidate your resources and maintain a family office. However, for most clients, this is still overkill.
- Single Family Private Trust Company: This third category of entity is technically unregulated and exists by virtue of a Wyoming Attorney General opinion written to the Wyoming Banking Commissioner back in 1993.[6] In that opinion letter, the state attorney general concluded that a company that does not provide trust business to the general public cannot be regulated as a “trust company.”[7] Over the following decades, Wyoming has given birth to a cottage industry of law firms, accountants, and professional service companies that support single family private trust companies. In my opinion, this is the ideal solution for most families, regardless of the scope of their wealth.
Starting Your Very Own Private Trust Company
A Wyoming single family private trust company can be organized as a limited liability company or as a corporation. However, many lawyers prefer the limited liability company due to its resiliency under debtor-creditor law in Wyoming. This requires an experienced hand to make certain that the ownership structure is not vulnerable to creditors, and that the private trust company is able to administer trust assets free of creditor interference.
A Wyoming single family private trust company can serve as a qualified trustee of a Wyoming Qualified Spendthrift Trust or Wyoming Domestic Asset Protection Trust. However, the operative word here is “can.” In order to meet the statutory definition of a “qualified trustee,” the Wyoming single family private trust company also needs to:
- Maintain or arrange for custody in Wyoming of some or all of the qualified trust property (e.g., open a bank account in Wyoming);
- Maintain records for the trust;
- Prepare or arrange for the preparation of fiduciary income tax returns for the trust; or
- Otherwise materially participate in the administration of the trust.
Many people who desire a Wyoming Private Trust Company have never administered their own trust before, much less their own private trust company. It would be folly to venture out on the path of forming your own private trust company without an experienced partner showing you the ropes and guiding you in your decisions. For that reason, when establishing your Wyoming single family private trust company, you should retain the services of an experienced administrative services provider that can help you with the basics.
Members of our service team have previous experience working for several of the largest international asset protection trust companies in the world. We help to ensure that your private trust company receives the administrative support that it needs to function efficiently and effectively.
[1] Wyo. Stat. § 4-10-103(a)(xxxv)(A) – (B).
[2] See Wyo. Stat. §§ 13-5-101 et seq.
[3] Wyo. Stat. § 13-5-105.
[4] Wyo. Stat. §§ 13-5-201 et seq.
[5] Wyo. Stat. § 13-5-208.
[6] Reimer, Christopher M., The Undiscovered Country: Wyoming’s Emergence As A Leading Trust Situs Jurisdiction, 11 Wyo. L. Rev. 165, 188 & n. 145.
[7] Wyo. Stat. § 13-1-101(xv) defines the term “trust business” as meaning:
[T]he holding out by a person to the public at large by advertising, solicitation or other means that such person is available to act as an executor, administrator, guardian, conservator or trustee in this state and accepting and undertaking to perform the duties in such a capacity in the regular course of his business.