Wyoming Modifies Uniform Trust Code

by Paul McSheffrey, J.D.
The Wyoming legislature has recently adopted changes to the Uniform Trust Code with Enrolled Act No. 59. 
Section 4-10-504(g) has been added to clarify that a discretionary distribution from a discretionary trust creates no property interest in the beneficiary.  There is no property interest created, regardless of whether the discretionary distribution is made according to a standard of distribution.
Changes have also been made to section 4-10-506.  This section refers to a creditor’s claim
against a settlor with respect to irrevocable trusts where only discretionary distributions may be made to the settlor.  A creditor or assignee of the right of a settlor is limited by 4-10-504(b) if:
– the transfer did not violate the Uniform Fraudulent Transfers Act when using the standard of proof found in 4-10-517;
– there is at least one qualified trustee;
– the trustee is not a trust beneficiary, related to the settlor, or a subordinate of the settlor under IRS section 672(c).
Additional subsections have been added to 4-10-816 regarding specific powers of a trustee.  A trustee may:
– make a distribution or pay trust expenses from a trust with two or more sub-trusts or shares from any of those sub-trusts or shares permitting income distributions to the beneficiary;
– separate a trust with more than one beneficiary into separate trusts or shares unless the trust language specifically requires the property to be held in one trust;
– exercise elections with regard to taxes; and
– decide each taxable year whether principal distributions to a beneficiary include net realized capital gains and losses in IRS 643(a) distributable net income.
Subsection (b) has also been added to 4-10-816.  A trustee’s power to make distributions of all or any portion of trust income or principal in further trust shall not be exercised such that it would prevent qualification for a federal income, estate, gift or generation-skipping transfer tax benefit claimed for the trust.  However, a trustee shall not be liable if the above power is exercised in good faith.
These changes become effective on July 1, 2015.
Paul McSheffrey, J.D. is a Regulatory Compliance Consultant at Bankers Advisory, A CliftonLarsonAllen LLP Division.  He is a graduate of Northeastern University and New England School of Law.  Paul is a member of the Bar in Massachusetts and New York.   He can be reached at paul@bankersadvisory.com