Issue: December, 2007
Author: Clay D. Geittmann
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Chaos to Comprehension: Estate Planning in Wyoming
Estate planning in Wyoming used to be much like trying to decipher the instruction manual for any item of technology. There was very little clear statutory guidance on estate planning so there was an element of “Hmm…let’s see what happens when we plug the cord in this slot.” If you didn’t get electrocuted and the appliance worked, then it was a successful experiment. Likewise, if your client’s estate bypassed probate, then it was a successful estate plan. The other solution was to predecease your clients, which really wasn’t all that viable of an option unless one was speaking with your spouse who just happens to be the beneficiary under your life insurance policies and retirement plans. Accordingly, I can assure you that I will not provide my lovely bride with a copy of this article.
The Wyoming Probate Code, WS §§ 2-1-101 et seq., used to provide the only statutory guidance to Wyoming lawyers preparing an estate plan for their clients. However, this guidance was more tailored towards “what not to do” rather than giving a path on how to prepare proper estate planning for a client. Since any Wyoming probate estate in excess of $150,000 currently requires formal probate administration under WS §§ 2-7-101 et seq., estate planners in Wyoming historically looked for mechanisms to avoid the relatively onerous and confusing probate administration provisions. This typically required that lawyers and their clients employ creative beneficiary designations, survivorship titling of assets, pay-on-death or transfer-on-death designations, coffee cans of cash buried somewhere in the back 40, or trusts to minimize probate exposure. However, for most reasonable sized estates, the use of trusts constituted the primary planning tool for Wyoming estate planning lawyers due to the fact that, if properly drafted and funded, a trust can avoid conservatorship proceedings as well as probate administration.
Until July 1, 2003, the creation or use of any trust in Wyoming forced most Wyoming lawyers to rely on the Restatement 2nd of Trusts, a couple of published Wyoming cases, the common law of other jurisdictions, and a certain modicum of blind faith, the latter of which could only have made the various professional errors and omissions carriers cringe. With the adoption of the Wyoming Uniform Trust Code, WS §§ 4-10-101 et seq., (the “WUTC”) in 2003, a technical amendment in 2005, and a substantive amendment in 2007, Wyoming lawyers now have a very clean and clear framework for establishing, modifying and otherwise assisting in the administration of any Wyoming trust. The WUTC applies to all Wyoming trusts created after 2003, and can be applied to any trust created before 2003 through the retroactive application provisions of WS § 4-10-1103(c). The principal drafters of the WUTC, Robert Leonard, Doug McLaughlin, John Warnick, Mike Bohl, Robert Leibrich and others, spent countless non-billable hours integrating the Uniform Trust Code with the very best statutory provisions that could be pulled from Alaska, Delaware, South Dakota, Nevada, and other trust savvy states to come up with the chassis from which we all benefit today. While this was neither an exciting nor glamorous process, it did create a well laid out statutory framework that can only help Wyoming lawyers dealing with trusts, as well as our clients who are using these trusts. Put another way, they created a coherent instruction manual for trusts within this state. Accordingly, if any of you see any of these drafters (who are rarely allowed into the general population for obvious reasons including their detailed knowledge of the Internal Revenue Code), please give them a pat on the back for their years of hard work.
The WUTC, as originally adopted in 2003 and amended in 2005, was intended to create a general statutory framework for the creation, administration, modification and termination of trusts, whether they be revocable, irrevocable or charitable in nature. While this trust instruction manual is not the “Complete Idiot’s Guide to Estate Planning,” it is coherent and a true benefit to each of us in our practices. In juxtaposition is the DVD instruction manual at which we all quickly looked and promptly disregarded unless we had a degree in mechanical or electrical engineering.
In addition, when the WUTC was originally adopted in 2003, the legislature adopted a parallel amendment to Wyoming’s Rule Against Perpetuities (RAP), the mere reference of which takes many of us back to the hazy law school days of property classes, thereby allowing a Wyoming trust to last for a period of up to 1,000 years. This amendment to the RAP created a whole new set of planning opportunities for clients who wanted to give their descendants an additional prolonged level of creditor protection as well as avoid the successive imposition of estate taxes at each subsequent generational level through the allocation of their generation skipping transfer tax exemption.
When coupled with Wyoming’s favorable income tax laws and lack of any estate tax, the WUTC and parallel RAP amendment quickly thrust Wyoming into the forefront of favorable states in which to create and site a trust. Several national publications, including Worth magazine, repeatedly rank Wyoming as one of the top states in the nation in which to create, site and administer a trust. As word gets out, Wyoming is continuing to attract a new type of “green economy” (take that one as you please) which in turn creates more business for Wyoming lawyers, accountants, financial institutions and the like. Over the past several years we have seen many trusts created under the WUTC by non-Wyoming residents, as well as the transfer of a multitude of trusts from other jurisdictions. This new business clearly reinforces the success of the WUTC and our legislature’s decision to adopt this act.
In 2007 the WUTC was further amended to allow for the creation of self-settled asset protection trusts--one more step in making Wyoming a competitor, if not a leader, in the area of trust law. To the credit of the principal drafters, they strived to provide a mechanism for the creation of self-settled asset protection trusts while discouraging the abuse of these trusts by those who would use them to defraud creditors. The goal was really to keep Wyoming competitive but not to attract disreputable persons and business to the state. This 2007 amendment is again generating more diversified “green” business to Wyoming, and will hopefully help us to ride out the rough economic times should there ever be any downturn in our mineral driven economy.
So what then does all of this mean for the practicing Wyoming lawyer? In general it means that the WUTC provides each and any one of us with a quick “go to” instruction manual when our clients come to us with a trust question. This is a much better resource than the cobbled common law that we were forced to rely on in the days of old. By virtue of the WUTC we are now all much better equipped to serve our clients who come to see us with estate planning questions and to prepare the necessary trusts for those clients whose probate estates exceed the current administration threshold. Moreover, we are now able to attract and retain the business of those clients who come from less favorable trust jurisdictions. I can tell you that over the past four years my print versions of the WUTC have gotten dog-eared, flagged, highlighted, coffee stained, and otherwise abused but have served me extremely well in responding to the needs of my clients. By comparison I’m still unable to decipher the DVD instruction manual which still looks brand new, so if anyone has the “Complete Idiot’s Guide” to DVD players, please let me know where I can find a copy.
Clay D. Geittmann earned a Bachelor or Arts in English from Eastern Washington University in 1994. He earned his J.D. from Gonzaga University College of Law in 1997. He is now a partner with the Jackson firm of Mullikin, Larson & Swift LLC.
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