25 Reasons Why South Dakota Trust Law is Ranked #1

South Dakota without a doubt stands as the premier jurisdiction for trust administration and estate planning.

This article delves into 25 compelling reasons that highlight why South Dakota’s trust law is considered the best in the nation, and why here at Independent Trust Company, we prefer trust situs in South Dakota.

1. Proactive Governance: The establishment of the South Dakota Governor’s Trust Task Force on Trust Administration and Reform exemplifies the state’s proactive approach. The task force ensures that trust laws are continuously updated, reflecting the dynamic nature of estate planning and trust administration. This unique commitment at the gubernatorial level underlines the importance placed on maintaining a cutting-edge legal framework for trusts.

2. Exclusive Trust Company Proliferation: South Dakota boasts the highest number of state-chartered private and public non-depository fiduciary services trust companies in the country. This abundance provides unparalleled options and expertise for those seeking trust services within the state.

3. Tax Haven: The absence of state income, capital gains, or estate taxes presents a significant financial advantage for trusts established in South Dakota. While adhering to federal tax obligations, trusts benefit from these substantial state-level tax exemptions.

4. Asset Management Leader: With around $3 trillion in assets under management, South Dakota leads the nation, surpassing the combined totals of other top states. This staggering figure not only reflects the state’s dominance in asset management but also underscores the trust it garners from individuals and entities seeking robust financial stewardship.

5. Unexpected Asset Superiority: Surprisingly, South Dakota manages more assets than Nevada, a state often associated with significant financial holdings, further cementing its status as a top trust jurisdiction.

6. Financial Stability: The AAA Bond Rating from Standard & Poors signifies South Dakota’s financial health and stability, essential qualities for a leading trust jurisdiction.

7. Fiscal Responsibility: The state’s pension systems are nearly fully funded, demonstrating a level of fiscal prudence that assures the sustainability of its tax advantages and financial benefits for trusts.

8. Directed Trust Flexibility: South Dakota’s directed trust statutes offer unparalleled flexibility, allowing for a tailored approach to trust management that caters to the specific needs of grantors, beneficiaries, and trust protectors.

9. Inheritance Tax Prohibition: The constitutional ban on the taxation of inheritances in South Dakota further enhances its appeal as a trust-friendly state.

10.Litigation Cost Awards: Being one of only two states that allow courts to award attorney fees and costs to the prevailing party adds an extra layer of fairness and protection in legal proceedings.

11. Quiet Trust Statutes: The effectiveness of South Dakota’s quiet trust statutes, particularly Codified Law 55-2-13, provides for discretion and privacy in trust administration.

12. Legal Safeguards: The state’s specific conflict of law and public policy statements are designed to protect against challenges under the Uniform Voidable Transactions Act (UVTA), offering a strong legal shield for trusts.

13. Innovative Spousal Trusts: South Dakota’s Special Spousal Trusts allow for the creation of Community Property Trusts by election, providing significant tax and estate planning benefits.

14. No Tax Trap: The absence of a “tax trap” ensures that trusts are not inadvertently subjected to unfavorable tax consequences.

15. Perpetual Trusts: South Dakota was the first state to repeal its Rule Against Perpetuities, allowing for the creation of trusts that can last indefinitely, providing long-term security and planning opportunities.

16. Trust Protector Statute: The introduction of the trust protector statute in 1997 added a layer of oversight and flexibility, allowing for appointed individuals to oversee and influence trust administration.

17. Discretionary Trust Innovations: The state was a pioneer in adopting Third Party Discretionary Trust statutes, which offer a nuanced approach to trust beneficiary rights and protections.

18. Special Purpose Entities: The authorization of special purpose entities to serve as trust advisors in 2011 marked a significant advancement, allowing for specialized management and advisory services for trusts.

19. Trust-Owned Insurance: South Dakota led the way in allowing the establishment of trust-owned captive insurance companies, providing a novel approach to risk management within trust structures.

20. Virtual Representation Modernization: The state modernized its virtual representation statutes in 2017, enhancing the flexibility and efficiency of trust administration.

21. Grantor Sovereignty: Over two decades, South Dakota has developed a tradition of enhancing and preserving grantor sovereignty, ensuring that the grantor’s intentions and goals are paramount.

22. Statutory Protections: Legal protections for attorneys, trustees, and others involved in trust creation and administration underscore the state’s commitment to supporting the professionals who uphold its trust laws.

23. Reputation for Excellence: Consistently ranked at the top for asset protection and Domestic Asset Protection Trust statutes, South Dakota’s trust jurisdiction is highly regarded, as evidenced by its frequent top placements in industry evaluations such as those by Trusts & Estates magazine.

24. Creditor Claim Limitations: The statute of limitations for creditor claims on fraudulent transfers is set at two years in South Dakota, providing a strategic advantage in asset protection. This limitation period positions the state as a leader, ensuring a robust defense against unjust claims.

25. Unparalleled Privacy: The absolute and permanent nature of South Dakota’s trust privacy seal is unmatched. When trust-related court proceedings occur, all associated records and information are sealed indefinitely. This level of confidentiality is crucial for maintaining privacy and preventing unwanted scrutiny or interference. Unlike other states where privacy may be temporary or conditional, South Dakota offers a steadfast guarantee that trust details remain inaccessible to the public eye, shielding them from potential exposure by curious or adversarial parties.

The compendium of these reasons demonstrates South Dakota’s unparalleled commitment to fostering a trust-friendly environment.

It’s not merely the individual laws or policies that set the state apart; it’s the cohesive and comprehensive approach to trust law that has cultivated a jurisdiction where privacy, flexibility, and financial advantage converge.

For individuals and entities seeking a secure, advantageous, and forward-thinking locale for trust establishment and administration, South Dakota stands as the clear choice, epitomizing the pinnacle of trust law in America.

This confluence of legislative foresight, judicial support, and financial acumen makes South Dakota not just a leader but the gold standard in the realm of trust law.

If you are ready to take advantage of South Dakota trust law, contact us today.