Wyoming Estate Tax: How to ‘Legally’ Avoid

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Paul Sundin, CPA

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Wyoming is one of the 33 states that do not have an inheritance tax as well as an estate tax. However, there are several cases when you may still have to deal with certain taxes inheriting property as a Wyoming resident.

It is always best to address professional assistance on taxation matters. However, there are certain things everyone should know about Wyoming inheritance laws.

Do Wyoming residents have to pay inheritance and estate taxes

As we have already mentioned, Wyoming itself does not have inheritance and estate taxes. But, inheriting property in another state, a Wyoming resident may have to pay estate or inheritance taxes if they exist in that state.

In this case, there is also a possibility that an heir will have to pay taxes on behalf of the deceased.

Moreover, if the estate exceeds $12,06 million, which is the federal estate tax exemption by 2022, it also becomes subject to the Federal estate tax.

Inheritance and gift taxes in Wyoming

In case the estate exceeds the $12,06 exemption bar, the Federal Estate Tax may reach as high as 40%. However, with the right fiscal maneuvering and the assistance of qualified professionals, you can easily protect your estate and ease the tax burden for your heirs.

Wyoming is also one of the states that don’t have a gift tax. In 2022 the federal gift tax annual exclusion has increased up to $16,000 per done. 

Trust StructuresGift Planning
Grantor Retained Income TrustCrummey Trust
Irrevocable Life Insurance TrustQualified Personal Residence Trust
Grantor Retained Annuity TrustGifts Below Annual Exemption

It means that every year you can give away as much as $16,000-worth of your property to as many people as you want without having to file Form 709: U.S. Gift (and Generation-Skipping Transfer) Tax Return.

That way, a married couple can reduce their estate by a minimum of $32,000 per year that way. 

Even if you make a “taxable” gift that exceeds the $16,000 limit, the gift tax still won’t apply to a Wyoming resident unless it exceeds the lifetime exemption amount.

However, such a gift has to be reported to the IRS.

Wyoming is a “tax-friendly” state

If you have recently passed away, you might be wondering whether you owe a Wyoming estate tax. The state’s gross estate consists of all the assets of a decedent, plus any debts and property taxes.

The value of the gross estate will be determined by the appraised value of the property. If the value of the estate is large enough, the federal estate-tax will apply. However, Wyoming has no state inheritance tax.

The statutes for the state of Wyoming require that all property be valued at fair market value. However, there is an exception to this rule for agricultural land. The appraised value of agricultural land is based on its productive ability.

The assessment rate for real estate, business properties, and minerals is 9.5%. A person’s death certificate should list the fair market value of the property. Those who pass away before 2005 are exempt from paying the Wyoming estate tax.

Wyoming residents are exempt from the federal estate tax if they die before the exemption threshold is reached. The federal estate tax has been in place for decades. It is very difficult to pay an estate tax, and less than 1% of estates are subject to it.

Fortunately, the process is simple and easy to calculate. The federal estate tax will take into account any property and business interests that the deceased owned. It also includes stocks, bonds, and mutual funds.

Wyoming is also one of the 9 states that don’t have an income tax. The state also doesn’t tax withdrawals from retirement accounts like 401(k) plans.

Trust StructuresGift Planning
Grantor Retained Income TrustCrummey Trust
Irrevocable Life Insurance TrustQualified Personal Residence Trust
Grantor Retained Annuity TrustGifts Below Annual Exemption

Final thoughts

A Wyoming resident may have to deal with the inheritance and estate taxes in 2 cases:

  • If they inherit a property from a state that, unlike Wyoming, have those taxes;
  • If the estate exceeds the federal estate tax exemption limit.

The annual gift tax exclusion allows you to legally reduce your taxable estate and ease the tax burden for the heirs. 

Moreover, the federal estate tax is a portable matter. It means that each spouse is entitled to heir exemptions to their estate when the second spouse dies. With proper maneuvering and benefits of Wyoming tax laws, a family in Wyoming can legally protect over $20 million worth of the estate. 

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Gilbert, AZ