Why form an asset protection trust?

Chances are you have fire insurance for your home, but when is the last time you had a fire? Credit events are more likely and can cost much more than just your home. Some events are foreseeable and others aren’t, but most individuals will experience at least one in their lifetime. Given such odds it makes little sense to roll the dice. So if you’re serious about protecting your assets, then there is no reason to have fire insurance while failing to establish a Domestic Asset Protection Trust.

Why Choose a Wyoming Trust?

Wyoming's popularity as a trust situs arose from a conscious effort by the State's legislature. Our state allows complete privacy, does not tax income and recognizes self-settled trusts. Maintenance costs are less than half of a Nevada trust and a third of Delaware's. Credit protection begins immediately with no waiting period. We also allow regulated and unregulated trust companies. You can easily act as your own trustee - further reducing costs and enhancing privacy. The state's benefits include, but are not limited to:

    • Self-Settled, Qualified Spendthrift & Discretionary Trusts are allowed
    • Credit Protection Begins Immediately - No Waiting Period
    • No Income, Gift, Excise or Intangible Taxes
    • Minimal Insurance Premiums
    • Multi-Generational & Perpetual Trusts
    • No Minimum Capital Investment
    • Trust Protector & Decanting Statutes

Why choose Cloud Peak Law to form your trust?

Our attorney, Mark Pierce, helped craft the State's statutes on trusts. He jokes this means he did a lot of work for no pay. In truth, it means you will be in the hands of somebody who knows how to make the law work for you. Our firm opened its doors in 2003 and has focused exclusively on estate planning and wealth management. We form hundreds of trusts each year. Our prices are as follows:

    1. Wyoming Trust - $5000
    2. Private Trust Company - $2500

    Contact Us Today

WHAT IS A DOMESTIC ASSET PROTECTION TRUST?

A Domestic Asset Protection Trust (DAPT) allows you to create a Trust for yourself and transfer your assets into that trust as protection against creditors.  A domestic trust is an attractive option for individuals wanting to protect their assets without having to give their assets away, transfer their assets to a trust of which they are not a beneficiary, or move their assets to a foreign jurisdiction or an offshore asset protection trust. 

After the transfer the trust owns the assets - not you. You are merely a beneficiary who controls the trust. Put simply, this means if a creditor pursues you they may not seize the trust's assets as they are no longer owned by you.

What are the Requirements for a Domestic Asset Protection Trust?

The basic requirements for creating a Domestic Asset Protection Trust include the following:

  • A Wyoming DAPT (Qualified Spendthrift Trust) is established by you under Wyoming law.
  • There must be at least one qualified trustee serving as Trustee.  You may not be a trustee.
  • The trustee must either be a resident of Wyoming or a person or institution authorized by Wyoming to act as a Trustee, i.e., a professional trustee.
  • A “Wyoming Private Trust Company” may be established to serve as the qualified trustee, and the client’s advisors in the client’s home state may serve an as Manager, Officer, Director, or agent of the Wyoming Private Trust Company.
  • You may remove or replace a Trustee.
  • The trust is irrevocable and cannot be amended, changed or revoked by you once established.
  • The trust must name the beneficiaries, which may include you, your family, friends or charities.
  • The Trustee generally has the authority to manage and invest and make distributions to beneficiaries; however, this authority must be in the Trustee’s sole discretion.
  • You may, however, serve as an investment advisor. The investment advisor may direct, consent or disapprove of a Trustee’s action or inaction relating to the investment of trust assets and direct the acquisition, transfer or retention of any trust investment.
  • You may veto a distribution.

What Type of Trust Property is Protected?    
The Wyoming DAPT provides protection for almost any type of property; however, at the time of the transfer of the property to Trust, you must sign an Affidavit affirming the following:

  • You have full right, title and authority to transfer the property;
  • The transfer will not make you insolvent;
  • You do not intend to defraud any creditors by transferring the property;
  • You do not have any pending or threatened court actions against you, except for those identified in the affidavit;
  • At the time of the transfer, you are not in default of a child support obligation by more than thirty (30) days;
  • You do not contemplate the filing for Bankruptcy; and,
  • You have and will maintain personal liability insurance of at least one million dollars ($1,000,000.00) or will provide coverage equal to the fair market value of the total transfers to the trust, whichever is less. (A personal liability policy in the amount of $1,000,000 typically cost approximately $200 – $400 per year and can be purchased as an umbrella policy).

What Type of Trust Property is Not Protected?

A DAPT does not provide protection for the following types of property:

  • Property to be used for the payment of Court ordered child support.
  • Property that is listed on an application or financial statement used to obtain or maintain credit from a creditor.
  • Property that has been fraudulently transferred to Trust pursuant to the Uniform Fraudulent Transfer Act if a claim is made within the statute of limitations.
  • Property is not be protected in a bankruptcy proceeding if transferred with the actual intent to hinder, delay or defraud any entity to which you were or became indebted and the transfer is within the statute of limitations.

Are there any Concerns or Risks Associated with Domestic Asset Protection Trusts?

  • Conflict of Laws. The concern is that an out of state Court may not recognize Wyoming law  and refuse to extend asset protection to the domestic trust.  There is little case precedent as to how a Court may decide this issue; therefore, it is recommended that the DAPT be established in the state where you are residing. If you are a resident of a state that has not enacted Domestic Asset Protection Trust legislation, the assets transferred should be held in Wyoming through a bank or other like depository or by a Wyoming business entity.
  • Full Faith and Credit Clause.   This clause of the U.S. Constitution provides that each state has to give full faith and credit to the laws of another state. There is a concern that if an out of state court decides not to recognize a DAPT and enters a judgment in favor of the creditor, the creditor may be able to enforce the judgment against the Trustee of the DAPT, even though the Trustee is located in Wyoming. This issue has not yet been addressed by the Courts.
  • Bankruptcy. The Bankruptcy Code creates a ten year statute of limitations for transfers to asset protection trusts with the actual intent to hinder, delay or defraud any entity you were or became, on or after the date the transfer was made, indebted and the transfer is within the statute of limitations. If you create a DAPT with the actual intent to hinder, delay or defraud a creditor, and you file a bankruptcy petition within 10 years of the transfer, the assets will not be protected from bankruptcy proceedings.

Wyoming Private Trust Company

You may have concerns over the costs of hiring an Independent Trustee and turning control of the Trust and its assets over to a Trustee you do not have a working relationship with.  The alternative is to establish a Wyoming Private Trust Company to serve as Trustee.


Characteristics and Benefits of the Wyoming Private Trust Company:

  • Formation.  A Wyoming Private Trust Company (“WPTC”) is either a Wyoming LLC or corporation formed specifically to serve your family and may not serve the public.
  • Owner.  The owner and manager is you and/or members of your family.
  • Committees.  Your WPTC will designate certain committees relating to operation and administration of your trust, which include an Investment Committee, Distribution Committee and Trust Administration Committee.
  • Benefits of Wyoming.  Wyoming is one of the best states for this since the Trustee is easy to form and administrate.  There are no capital contribution requirements and there is no regulation by Wyoming.  Most other states have minimum capital contribution requirements of between $200,000 and $500,000 and have significant regulation.  This makes Wyoming the most attractive state to form a Private Trust Company to serve as Trustee of your DAPT or other family trust.
  • Service Agreements.  The WPTC can enter into service agreements with trusted advisors, investment advisors, financial advisors, family offices, trust companies, certified public accountants, and legal advisors regarding the administration of the WPTC.
  • Operating Agreement/Bylaws. The operations of the WPTC are governed by the Operating Agreement of an LLC or the Bylaws of the Corporation.  Care must be given to ensure that the Operating Agreement or Bylaws are drafted to ensure that the WPTC does not run afoul of estate tax inclusion issues.  The IRS has issued certain Private Letter Rulings and an IRS Notice that provide non-controlling guidance regarding the structuring of Private Trust Companies. (PLR 200546055, PLR 200548035, PLR 200523003 and IRS Notice 2008-63)

Wyoming Family Office

In addition to establishing a WPTC, you may consider the formation and management of a Family Office in Wyoming for purposes of managing and administering your WPTC, family trust assets, and closely held businesses. We offer the following services, as part of establishing and managing a Wyoming Family Office:

  • Formation and administration of a WPTC.
  • Wyoming Registered Agent.
  • Wyoming Mailing Address.
  • Wyoming Physical Address.
  • Mail Forwarding.
  • Wyoming Telephone Number.
  • Wyoming Bank Account.
  • Legal Counsel regarding the administration of family trusts and the family office.
  • Officers, Directors, Managers or Agents.
  • Physical Office Presence.
  • Assistance with filing of Wyoming Annual Reports with the State of Wyoming.
  • Assistance with the preparation of Annual Meeting Minutes and Resolutions for family Business Meetings.
  • Use of a conference room for business and family meetings.
  • Counseling and education of family members on the administration of family assets, family trusts and the family office.
  • Tax and administrative advice.
  • Coordinating with family advisors, tax professionals, investment managers and family legal counsel on the administration of the Wyoming Family Office.

A Wyoming Private Trust Company can serve as Trustee of the following types of Trusts:

  • DAPT.  There is a requirement that at least one of the Trustees be a resident of, or incorporated under the laws of, Wyoming.  In lieu of hiring a Wyoming Resident, a Wyoming Bank, or a Wyoming Public Trust Company, you may form a WPTC to serve as Trustee of the Wyoming Asset Protection Trust.
  • Wyoming Dynasty Trust.  The WPTC may also serve as Trustee of a Wyoming Dynasty Trust.  In order to establish a Wyoming Dynasty Trust, which can last for up to 1,000 years, the trust is required to be governed by Wyoming law and the trustee must maintain a place of business in Wyoming, administer the trust in Wyoming, or be a resident of Wyoming.  Rather than hiring a Wyoming Bank or Resident to serve as Trustee of the Wyoming Dynasty Trust, you may establish a WPTC to serve as Trustee.
  • Current Family Trusts.  For families that currently have Trusts in place which require a Corporate Fiduciary/Trustee to serve as Trustee, a WPTC may qualify as a Corporate Fiduciary, which can serve as the Trustee.  The WPTC can also help to bring the administration of various family trusts under the administration of one WPTC.
  • Qualified Domestic Trust A WPTC may serve as the U.S. Trustee of a Qualified Domestic Trust established for the benefit of a surviving spouse that is not a United States Citizen.
  • Wyoming Trust.  Due to the favorable trust legislation and potential income tax benefits associated with establishing a Trust in the State of Wyoming, the appointment of a Wyoming Private Trust Company can help to establish a sufficient connection to the state of Wyoming, bringing the Trust under the jurisdiction of the state of Wyoming and its favorable tax and trust laws.
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