Florida and Wyoming take fundamentally different approaches to trust law and asset protection. The most significant difference between a Florida trust and Wyoming trust is that Florida does not have domestic asset protection trust legislation. A trust created in Florida can protect beneficiaries, but it cannot protect the person who creates the trust. Wyoming trusts can protect both the grantor and the beneficiaries. For Florida residents with significant assets or exposure to liability, understanding this difference is critical to effective planning.
The Fundamental Difference: Self-Settled Trust Protection
Florida law explicitly denies asset protection to anyone who creates a trust and names themselves as a beneficiary. Florida Statute §736.0505(1)(b) states that with respect to an irrevocable trust, a creditor or assignee of the settlor may reach the maximum amount that can be distributed to or for the settlor’s benefit. This means that if you create a trust and retain any beneficial interest, your creditors can reach those trust assets. Florida provides no self-settled spendthrift protection whatsoever.
Wyoming takes the opposite approach. Wyoming Statute §4-10-510 and the sections that follow establish the qualified spendthrift trust, which allows a settlor to be a discretionary beneficiary while still achieving creditor protection. A properly structured Wyoming trust can protect assets from the settlor’s creditors after a two-year waiting period, which can be shortened to 120 days through a statutory notice procedure.
The practical implications are straightforward. If a Florida resident creates a trust under Florida law and names themselves as a beneficiary, creditors can reach those assets. If the same person creates a Wyoming trust with a Wyoming trustee and follows the statutory requirements, those assets may be protected after the waiting period has passed.
What Florida Trust Law Does Protect
Florida trust law does provide meaningful protection in certain circumstances. Third-party beneficiaries receive spendthrift protection under Florida Statute §736.0502. When someone other than the beneficiary creates a trust, the beneficiary’s creditors generally cannot reach the trust assets. For example, if a parent creates a trust for the benefit of a child, the child’s creditors cannot access those funds. This is standard trust law applicable in most states.
Discretionary trusts receive additional protection under Florida Statute §736.0504. When a trustee has discretion over whether to make distributions, creditors generally cannot compel the trustee to distribute funds to satisfy a judgment. However, this protection evaporates when the beneficiary is also the settlor. In that case, Florida Statute §736.0505 allows creditors to reach any amounts that could be distributed to the settlor.
Florida law also recognizes exception creditors who can reach trust assets even when spendthrift provisions would otherwise apply. Under Florida Statute §736.0503, these include a child, spouse, or former spouse with a judgment for support or maintenance, a judgment creditor who provided services protecting the beneficiary’s interest in the trust, and state or federal government claims as provided by law.
Wyoming Trust Law: DAPT Provisions
Wyoming’s qualified spendthrift trust statutes under Wyoming Statute §4-10-510 and following sections allow the settlor to be a discretionary beneficiary while achieving creditor protection. The trust must be irrevocable, must have a qualified Wyoming trustee, and must include a spendthrift provision.
The statute of limitations under Wyoming Statute §4-10-523 provides that creditors have two years from the date of transfer to bring a claim. This period can be shortened to 120 days through a statutory creditor notice procedure that provides certainty about when the protection becomes effective. Creditors challenging a transfer must prove fraudulent intent by clear and convincing evidence, a higher standard than the preponderance of evidence used in many jurisdictions.
Wyoming does recognize child support as an exception creditor claim, but otherwise protects against most creditor claims once the waiting period has passed.
Wyoming also offers the private family trust company, a structure that allows families to form their own trust company with the grantor serving as manager. This provides operational control over trust assets that is not available in Florida or most other states. The grantor can remain actively involved in managing the business interests held in trust while still achieving asset protection.
Florida Exemptions Outside of Trust Law
Florida provides significant asset protection through exemptions that exist outside of trust law. These exemptions are why many wealthy individuals choose to reside in Florida, but they do not cover all assets.
The Florida homestead exemption under Article X, Section 4 of the Florida Constitution provides unlimited value protection for a primary residence. The protection is limited by acreage, with half an acre permitted within a municipality and 160 acres outside municipal limits. This is one of the strongest homestead exemptions in the country.
Tenancy by the entireties provides protection for property held by married couples. Assets held in this form of ownership are protected from creditors of only one spouse. Florida extends this protection to both real and personal property.
Retirement accounts receive strong protection under Florida Statute §222.21. IRAs, 401(k) plans, and other qualified retirement accounts are generally protected, with unlimited protection for ERISA-qualified plans.
Life insurance and annuities are protected under Florida Statutes §222.13 and §222.14. The cash value of life insurance policies and annuity benefits are generally beyond the reach of creditors.
Wages receive protection under Florida Statute §222.11. Head of household wages are protected from garnishment.
These exemptions are valuable, but they leave gaps. Liquid assets such as cash and investment accounts beyond retirement plans remain exposed. Business interests, rental real estate outside the homestead, and other assets need protection that Florida exemptions do not provide. A Wyoming DAPT can fill these gaps.
LLC Comparison: Charging Order Protection
The differences between Florida and Wyoming extend to limited liability company protection as well. Under Florida Statute §605.0503, multi-member LLCs receive charging order protection, meaning a creditor’s exclusive remedy is to obtain a charging order against distributions rather than seizing the membership interest itself. However, single-member LLCs in Florida are vulnerable. Following the Florida Supreme Court’s decision in Olmstead v. FTC in 2010, creditors may be able to foreclose on a single-member LLC interest to satisfy a judgment.
Wyoming takes a more protective approach under Wyoming Statute §17-29-503. The charging order is the exclusive remedy for creditors of LLC members regardless of whether the LLC has one member or multiple members. Wyoming is one of the few states that extends this protection to single-member LLCs.
For a Florida resident with a single-member LLC, the entity provides limited protection against personal creditors. The same LLC organized in Wyoming receives stronger statutory protection. Many planners combine Wyoming LLCs with Wyoming DAPTs for comprehensive asset protection.
State Income Tax Comparison
Florida has no state income tax. Trusts administered in Florida are generally not subject to state income taxation.
Wyoming also has no state income tax. Trusts administered in Wyoming are not subject to state income taxation.
On this factor, the two states are equal. There is no tax disadvantage for a Florida resident using a Wyoming trust.
Dynasty Trust Duration
Florida amended its rule against perpetuities in 2022. For trusts created before July 1, 2022, Florida limits duration to 360 years. For trusts created on or after July 1, 2022, Florida extended this to 1,000 years.
Wyoming permits trusts to last for 1,000 years, which is effectively perpetual for planning purposes. With Florida’s 2022 amendment, both states now offer the same maximum trust duration for newly created trusts.
Can Florida Residents Use Wyoming Trusts?
Florida residents can use Wyoming trusts, but proper structure is essential. The trust must have a qualified Wyoming trustee, either an individual resident of Wyoming or a Wyoming trust company. The trust must select Wyoming governing law. The trust should hold assets that can be administered in Wyoming. There should be genuine connections to Wyoming beyond simply choosing Wyoming law.
There are considerations to keep in mind. Choice of law risk exists because Florida courts might apply Florida law in certain circumstances despite the Wyoming choice of law provision. The position is stronger when assets are located outside Florida. Using a Wyoming trust does not guarantee protection, but it creates meaningful obstacles for creditors that do not exist under Florida law. For Florida residents, a Wyoming trust is better than relying solely on Florida law, which provides no self-settled trust protection at all.
Conclusion
The fundamental difference between a Florida trust and a Wyoming trust is that Florida does not allow self-settled asset protection while Wyoming does. Florida residents can use Wyoming trusts to achieve protection that Florida law does not provide. Florida has strong homestead and other exemptions, but these do not cover all assets. For guidance on Wyoming trusts for Florida residents, consider consulting Mark Pierce and Matt Meuli at Wyoming Asset Protection Attorney.