August 7, 2026
3:00 pm

Life Settlements for Wyoming CPAs and Tax Professionals: A 2026 Practice Guide

For a Wyoming client, the federal return is the entire return. Wyoming imposes no individual income tax, no estate tax, and no inheritance tax, so neither the ordinary income tier nor the capital gain tier of a life settlement carries a state layer, and there is no Wyoming return to prepare for the transaction. That is a genuinely simplifying fact, and it means every dollar of planning value in this area has to be found on the federal side: basis, character, the 3.8% net investment income tax, and Medicare premium thresholds.

The regulatory side calls for more care, and for an honest admission. Wyoming’s insurance code is Title 26 of the Wyoming Statutes, and the Wyoming Insurance Department — whose Licensing Division sits at 106 East 6th Avenue in Cheyenne — does issue viatical settlement licenses. What we are not going to do on this page is supply a chapter and section number we have not been able to verify against the current code. Compliance charts circulate with citations that turn out to point at the wrong chapter; Title 26, chapter 42, for instance, is the Wyoming Life and Health Insurance Guaranty Association, which has nothing to do with settlements and is a common misfiling.

This guide is written for the CPA, EA, or tax attorney. It covers the federal computation in the order the return requires it, the diligence steps that substitute for a clean statutory cite, and the long-term care economics that start most of these conversations in a state with very few facilities and very long distances.

In This Article

What to verify in Wyoming before you cite anything
A zero state overlay, and the federal levers that remain
Adjusted basis after the retroactive repeal
Splitting one payment into three characters
The two information returns, and transfer for value
The section 101(g) exclusion, and why you take no referral fee
Wyoming Medicaid and frontier care economics
Frequently Asked Questions

Life Settlements for Wyoming CPAs and Tax Professionals: A 2026 Practice Guide

What to verify in Wyoming before you cite anything

The regulator is the Wyoming Insurance Department, headed by the Insurance Commissioner, with the Licensing Division in Cheyenne. Wyoming’s insurance code is Title 26 of the Wyoming Statutes. Viatical settlement licensing exists as a Wyoming license type, which is confirmable through the department and through the national licensing systems producers use.

What we can confirm is the department, the license type, and the title. What we have not been able to confirm from the public record is the current chapter and section numbering of Wyoming’s viatical or life settlement provisions. That is a meaningful gap, and the correct professional response is not to guess. Request written confirmation of the operative statutory and regulatory authority from the Wyoming Insurance Department before you cite a section in an engagement letter, a written opinion, or a client memo. A wrong statutory cite in a professional deliverable is worse than no cite.

In place of a clean citation, three diligence steps do the same protective work. Confirm the provider and any broker hold current Wyoming licenses, using the department’s licensee lookup rather than a representation on a website. Confirm the required disclosures were delivered in writing and are physically in the client’s file before signature. And read the purchase agreement’s rescission provision on its own terms rather than assuming a statutory rescission window applies — if you cannot verify the statutory period, the contractual one is what your client actually has.

Those steps also happen to be the ones that screen out the bad actors, which is the practical point. Our client-facing pages on life settlement licensing in Wyoming and on life settlement scams and red flags cover the same checks in lay language.

A zero state overlay, and the federal levers that remain

Wyoming has no individual income tax. It also has no estate tax and no inheritance tax. Federally, the exclusion was set at $15 million per decedent for 2026 under the 2025 federal legislation and is indexed thereafter, which for virtually every Wyoming household means the death benefit was never exposed to transfer tax at all.

The consequence is that the most common non-tax argument for keeping an unwanted policy in force — that the family will need the death benefit to pay death taxes — is simply unavailable in Wyoming for the great majority of clients. That does not mean selling is right; it means the reason to keep the policy has to be an actual need for the coverage, not a tax story.

What remains are federal timing levers, and they are worth modeling. The capital gain tier of a settlement is net investment income, so the 3.8% tax under IRC section 1411 applies above the statutory modified AGI thresholds. Separately, a large one-year income spike feeds the two-year lookback that determines Medicare IRMAA surcharges on Part B and Part D premiums. For a client in their seventies, an IRMAA bracket jump is a real cash cost that arrives eighteen months after the closing and surprises everyone. Where a client has any discretion over the closing date — and in a competitive process there is often several weeks of it — model December against January before agreeing to a schedule. The client-facing summary is on our page on life settlement taxes in Wyoming.

Adjusted basis after the retroactive repeal

Revenue Ruling 2009-13 required a seller’s basis in a life insurance contract to be reduced by cumulative cost-of-insurance charges, which inflated gain and produced the incoherent result that a sale was taxed more heavily than a surrender of the identical contract.

Section 13521 of the Tax Cuts and Jobs Act amended IRC section 1016(a)(1)(B) to eliminate the reduction, retroactive to transactions entered into after August 25, 2009. Adjusted basis is cumulative premiums paid, reduced by cash dividends received, partial surrenders, and untaxed distributions. Mortality and cost-of-insurance charges do not reduce it. Verify this by hand on the first settlement you handle rather than trusting an insurance module that predates 2018.

The documentation is the work. Request the full premium history and the carrier’s stated investment in the contract in writing, and allow real time. Where the contract came through a section 1035 exchange, basis carries over from the surrendered policy while the current carrier’s records generally start at the exchange date; the pre-exchange premiums have to come from the prior carrier. In Wyoming ranch and mineral-interest practices there is a related recurring issue: policies purchased as part of a succession or buy-sell arrangement where an entity paid premiums and an individual holds title, or the reverse. Basis follows the owner of the contract, so establish the ownership chain first.

Gross up for policy loans. Where a loan is repaid out of closing proceeds, the amount realized is the gross settlement price. A $290,000 sale with a $55,000 loan payoff produces a $290,000 amount realized against a $235,000 wire, and the information return will report the gross number.

Item	Wyoming position
Regulator	Wyoming Insurance Department, Licensing Division, Cheyenne
Insurance code	Title 26, Wyoming Statutes
Settlement chapter and section	Not verified here — request written confirmation from the department
Common misfiling	Title 26, ch. 42 is the Life and Health Insurance Guaranty Association, not settlements
State individual income tax	None
State estate / inheritance tax	Neither
Medicaid	Department of Health, Division of Healthcare Financing; no expansion adopted
Median semi-private nursing facility cost	Roughly $8,000–$9,500 per month in recent surveys

Adjusted basis after the retroactive repeal

Splitting one payment into three characters

The federal ordering does not vary by state. First, proceeds up to adjusted basis are recovered tax-free. Second, the excess of the policy’s cash surrender value over adjusted basis is ordinary income — the inside build-up the client would have recognized on a surrender, and the character does not change because the exit route changed. Third, everything above the cash surrender value is capital gain, long-term where the contract was held more than a year, reported on Form 8949 and carried to Schedule D.

Worked: a Casper client paid $135,000 of premiums, the cash surrender value at closing is $155,000, and the settlement pays $370,000. Basis recovery is $135,000; ordinary income is $20,000; long-term capital gain is $215,000. A surrender would have delivered $155,000 gross with the same $20,000 of ordinary income and no capital gain component at all.

Because Wyoming imposes no state income tax, that entire structure is taxed exactly once, federally, which makes the after-tax modeling unusually clean. It also means the ordinary income tier and the gain tier face different federal rates but identical state treatment, so there is no state-level reason to prefer one characterization over another — a contrast with states that offer a capital gains preference. The client-side comparison is laid out on our page on lapse versus surrender versus settlement.

The two information returns, and transfer for value

IRC section 6050Y, added by TCJA section 13520 and implemented by final regulations at T.D. 9879, applies to reportable policy sales occurring after December 31, 2018. Form 1099-LS, Reportable Life Insurance Sale, is filed by the acquirer and furnished to the seller and the issuing carrier, reporting the gross amount paid. Form 1099-SB, Seller’s Investment in Life Insurance Contract, is filed by the issuing insurance company and reports the seller’s investment in the contract and the policy’s surrender amount — the two inputs for tiers one and two.

The 1099-SB is the one clients misplace, because it arrives from the carrier months after the money moved and looks like routine policy mail. Request a duplicate rather than estimating, and reconcile the carrier’s investment-in-contract figure against your own reconstruction; the two will diverge after a 1035 exchange or a block acquisition, and that difference is exactly what a matching notice will ask about.

On transfer for value, IRC section 101(a)(2) makes the death benefit taxable to a transferee who acquired the policy for valuable consideration, to the extent it exceeds consideration paid plus the transferee’s subsequent premiums. TCJA section 13522 added section 101(a)(3), disabling the standard exceptions — carryover basis and transfers to the insured, a partner of the insured, a partnership in which the insured is a partner, or a corporation in which the insured is a shareholder or officer — for a reportable policy sale. That is the institutional buyer’s exposure, priced into the market.

Your client’s exposure is the private transaction running alongside: an adult child buying a parent’s policy, a family ranch corporation restructuring a buy-sell, a policy assigned to an LLC for consideration. Each raises section 101(a)(2) on facts that will not appear on the policy, and each deserves a written analysis rather than a hallway answer.

The section 101(g) exclusion, and why you take no referral fee

IRC section 101(g) treats amounts received on the sale or assignment of a policy to a licensed viatical settlement provider as paid by reason of the insured’s death, and therefore excluded from gross income, where a physician certifies that the insured is reasonably expected to die within twenty-four months. Chronically ill insureds under section 7702B(c)(2) receive a narrower exclusion subject to a per diem limitation.

For a terminally ill client, that exclusion often moves more money than the difference between the highest and second-highest bid, and it is entirely dependent on the buyer holding the correct license. In Wyoming, where the statutory citation is harder to pin down than in most states, the verification step matters more, not less: confirm the provider’s viatical settlement license with the Wyoming Insurance Department directly before assuming the exclusion is available. Our page on what a viatical settlement is explains the distinction from an ordinary settlement.

On compensation, the answer is short. A CPA should accept no referral fee, finder’s fee, or commission from any party to a client’s policy sale. The AICPA Code of Professional Conduct requires disclosure of commissions and referral fees to the client and prohibits commissions outright with respect to an attest client, and a number of state insurance codes separately prohibit paying accountants, attorneys, or physicians a finder’s fee in connection with policies insuring terminally ill individuals. Beyond the rules, the moment your compensation depends on the client choosing one exit over another, your analysis stops being worth anything. Bill your normal fee for the tax work, disclose it in the engagement letter, and decline everything else.

Wyoming Medicaid and frontier care economics

Wyoming Medicaid is administered by the Wyoming Department of Health through its Division of Healthcare Financing. Wyoming has not adopted Medicaid expansion, which is politically salient but largely beside the point here: expansion governs the adult coverage group, not the aged, blind, and disabled or institutional pathways, which is where these clients apply. Confirm current eligibility figures with the Division rather than importing a national number.

The resource rules that decide whether a policy is a problem are federal. Under 20 C.F.R. section 416.1230, the cash surrender value of life insurance is a countable resource unless the total face value of all policies on the insured is $1,500 or less, in which case the cash value is excluded outright. Term insurance with no cash value is not a resource. And the sequencing rule families reliably invert: a sale at fair market value is not an uncompensated transfer and creates no penalty under the sixty-month look-back, but the proceeds become a countable resource in the month after receipt. Solving a premium problem without planning the spend-down creates an eligibility problem. That sequence is set out on our page on the Medicaid look-back and selling a policy.

Wyoming’s care landscape is shaped by having the smallest population of any state spread across the ninth-largest land area. There are relatively few skilled nursing facilities statewide, and the state operates the Wyoming Life Resource Center in Lander as part of the mix. Recent published cost-of-care surveys put the median semi-private nursing facility rate in the range of roughly $8,000 to $9,500 per month, lower than coastal states in absolute terms but often unavailable within a reasonable drive of family. That geography turns a care decision into a relocation decision, and it removes the informal caregiving that quietly subsidizes care in denser states.

For your file, request the policy cover page with form number, issue date, face amount, and owner; the most recent in-force illustration; the complete premium history; and the current loan balance. Pine Lake Life Solutions provides education and a free policy review and does not purchase policies. We do not provide legal, tax, or investment advice — that is your engagement, and this page is written to support it. If an independent read on whether a client’s contract would draw market interest would help before you build a projection around it, the review is free at (305) 209-7183.

Frequently Asked Questions

Why doesn’t this page give a Wyoming statute section for life settlements?

Because we could not verify the current chapter and section numbering against the code, and a wrong citation in a professional deliverable is worse than none. Wyoming’s insurance code is Title 26 and the Insurance Department does issue viatical settlement licenses. Request written confirmation of the operative authority from the department before citing a section in an opinion or engagement letter.

Does a Wyoming resident owe any state tax on settlement proceeds?

No. Wyoming imposes no individual income tax, so neither the ordinary income tier nor the capital gain tier carries a state layer, and there is no Wyoming return to prepare for the transaction. Wyoming also has no estate tax and no inheritance tax. All of the planning value is on the federal side, principally in timing and threshold management.

If there is no state tax, does the closing date still matter?

Yes, for federal reasons. The capital gain tier is net investment income and can trigger the 3.8% tax under IRC section 1411, and a one-year income spike feeds the two-year lookback that sets Medicare IRMAA surcharges on Part B and Part D premiums. Those surcharges arrive roughly eighteen months later and catch clients by surprise. Model December against January where the schedule allows.

Does Wyoming’s decision not to expand Medicaid affect a long-term care application?

Not directly. Expansion governs the adult coverage group. Long-term care applicants qualify through the aged, blind, and disabled or institutional pathways, which exist regardless of expansion status and follow their own income and resource rules. Confirm current figures with the Wyoming Department of Health, Division of Healthcare Financing, rather than a national summary.

How is basis computed for a policy an entity paid premiums on but an individual owns?

Basis follows the owner of the contract, so the first task is establishing the ownership chain, not the payment history. Where an entity paid premiums on an individually owned policy, the payments may have been compensation, distributions, or loans depending on the facts, each with different consequences. Sort ownership and characterize the payments before you build any basis schedule.

Can I take a fee from the broker for referring a Wyoming client?

You should not. The AICPA Code of Professional Conduct requires disclosure of referral fees and commissions and bars commissions with respect to attest clients, and insurance codes in many states prohibit compensating accountants in connection with these transactions. More practically, an analysis produced by someone paid on the outcome is worth nothing to the client. Bill your normal fee and decline the rest.

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