Wyoming Trust Case Study with Thomas James
When Thomas Jones started his tech company, IntraWeb, he never expected it to sell it for $10 million in the space of just 5 years. But, when a major public company came calling, Thomas couldn’t say no. After the champagne was popped and the excitement had settled in, Thomas began to think about the financial implications of the sale and what it would mean for his family.
With the sale, Thomas wanted to three primary things:
- Reduce the tax burden of the sale. Thomas had very little cost basis in the company, so in his home state of Colorado, this sale would amount to a $10 million taxable gain, generating roughly $463,000 in taxes.
- Have access to the proceeds of the sale if he needed them, but protect them from creditors.
- Provide a dynasty trust for his children, grandchildren, and potentially later descendants.
Thomas contacted his CPA, who suggested that he work with First Western Trust to reach his goals. When we sat down with Thomas and understood his objectives, we recognized that a Wyoming trust would help him reach each of these goals.
- To ensure that Thomas could continue to access funds from the sale, with creditor protection, we set up an irrevocable Wyoming Incomplete-gift Non Grantor (WING) trust. Because it is set up as a self-settled trust, Thomas can both create the irrevocable trust and be a beneficiary.
- Thomas also created a Wyoming LLC (of which he was the manager) and transferred his business interests into it. He then transferred the WY LLC interests over to his newly-created WING, which then owned the LLC. Because the Trust was set up as a non-grantor trust, when IntraWeb was sold by the LLC, the $10 million gain was only subject to federal taxation, saving just under $463,000 in state taxation.
- We also established the Trust as a dynasty trust to retain, protect, grow and distribute its assets to generations of the Jones family without depletion by Federal estate taxation, for up to 1,000 years.
How It Works
Creating this level of planning requires sophisticated financial tools. Thomas had to give up enough control over the assets that he would not be deemed the owner for income tax purposes, while at the same retaining enough control that he is deemed to have not made a gift of those assets for gift and estate tax purposes.
For those who are interested in the intricacies of a Wyoming trust and taking advantage of the unique features provided by Wyoming trusts, or if you need help designing a strategic financial plan to meet your goals, call our Jackson Hole team today.
First Western Trust cannot provide tax advice.
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