Every Wyoming trust has a trustee. The management and creations of trusts is governed by the provisions of Uniform Trust Code- WY Stat § 4-10-101 et seq. The trustee is responsible for managing and distributing assets held in a trust for beneficiaries in accordance with the terms of a trust. A trust can have one trustee or co-trustees. A trust beneficiary is a person who is entitled to receive property that is held in the trust. A trust can be funded with any type of property such as cash, stocks, bonds, mutual funds, or even jewelry or real estate. Under Wyoming law, trustees owe a legal fiduciary duty to the beneficiaries of a trust. This means that trustees have a duty of loyalty and a duty of care. If they fail to fulfill their fiduciary duties, they can be held personally liable to the beneficiaries.
Reasons for Trust Disputes in Wyoming
Typically, trust lawsuits involve beneficiaries alleging wrongdoing by the trustee or trustees. Common reasons for trust litigation include:
- To compel the trustee to provide a copy of the trust
- To obtain an accounting from the trustee
- To ask the court to order the trustee to do certain things, such as make a distribution or follow a provision of the trust agreement
- To recover property that belongs to the trust
- To suspend the trustee’s powers or to remove the trustee for breaching fiduciary duty
Depending on the allegations in the litigation, as a result of the litigation the trustee may be removed and may face personal liability for losses suffered by the trust as a result of their wrongful or negligent actions. WY Stat § 4-10-1001
Types of Trusts in Wyoming
Depending on the needs and goals of the person creating the trust and its beneficiaries, there are many types of trusts. Generally a trust is set up to provide control over how assets are distributed to beneficiaries. However, there are trusts that are set up for even more specific reasons. For example, a spendthrift trust is designed to protect assets from a financially irresponsible beneficiary. Because the assets belong to the trust and not to the beneficiary, neither the beneficiary or the beneficiary’s creditors can access the assets. The trustee has discretion as to how the assets will be distributed for the benefit of the beneficiary.
A special needs trusts or supplemental needs trusts are set up to provide for dependents who have disabilities. While they are often set up for minors, they can also be set up for adults who have special needs. They are designed to help preserve the beneficiary’s assets while ensuring that they remain eligible for public benefits such as Supplemental Security Income and Medicaid.
Depending on how and when it was created, a trust can be a testamentary trust or an inter vivos trust. An inter vivos trust is created by an individual during their lifetime. The person who creates a trust is known as a grantor or trustor. During their lifetime, the grantor can fund the trust with their property and use it during their lifetime. The grantor is generally also the trustee. After they pass away, the remainder beneficiaries will have access to the assets according to the terms of the trust. The trust is managed by a successor trustee.
A testamentary trust, also known as a will trust, is created by a will and is set up during the estate administration process. In their will, the testator provides that the executor is to set up the trust and states what assets are to be used to fund it. The will also states who the beneficiaries are to be. Oftentimes, testators decide to create a testamentary trust to hold assets for their minor children.
Because each type of trust has a trustee and a trust document, and because there are legalities related to the creating and managing of any type of trust, any type of trust can be the basis of trust litigation.
No Contest Clause in a Wyoming Trust
While any trust can be the center of trust litigation, a trustor can include provisions that are designed to discourage certain types of litigation. A no contest clause in a trust is a provision that requires that a beneficiary who challenges the trust to lose all or a portion of the assets in the trust that they would otherwise be entitled to. While in some jurisdictions no contest clauses in trusts are unenforceable, they are enforceable in Wyoming. In EGW and AW v. First Federal Savings Bank of Sheridan, 413 P.3d 106 (Wyo. 2018) The Wyoming determined that a no contest clause was enforceable even when doing so would deprive minor beneficiaries of their interests under the trust.