In the face of global geopolitical instability, political uncertainty in the U.S., and potential changes in the tax code, a key question arises: How should you approach planning, and how can well-settled trusts provide security in unsettled times? These challenges not only highlight the importance of proactive planning but also showcase the trust industry’s strength in leveraging modern trust law to create stability amidst uncertainty.
Establishing a well-settled trust can effectively address specific concerns. One significant area of opportunity lies in trust taxation, particularly leveraging South Dakota’s no state income tax status for substantial tax savings across generations. As we discussed in a previous article, the Spousal Lifetime Access Trust (SLAT) is an irrevocable trust created by one spouse for the benefit of the other. It offers a unique opportunity for married couples to transfer wealth, reduce estate taxes, and protect assets. South Dakota’s favorable trust laws further enhance the benefits of both Completed Gift and Incomplete Gift SLATs because of that state’s progressive approach to modern trust law.
We invite you to explore the power of SLATs in South Dakota in the video below. David Warren, Co-Founder and Chairman of Bridgeford Trust Company, provides insights into using well-settled trusts during uncertain times, with a focus on SLATs and the importance of jurisdiction selection.
Jurisdiction Matters: Why South Dakota?
South Dakota fiduciary law consistently ranks the state as one of the best U.S. trust jurisdictions for advisors and their clients worldwide. In the context of SLATs, understanding the powerful planning nuances of South Dakota is essential. Below are specific attributes that clearly distinguish South Dakota as a leading U.S. trust jurisdiction for SLATs.
- Dynasty Trust: South Dakota, the first state in the nation to abolish the Rule against Perpetuities, created the Dynasty Trust which allows trusts to “live forever,” avoiding federal transfer taxes for generations. You can watch this video about Dynasty Trusts on Bridgeford’s YouTube channel to learn more about its history, how they work, and why South Dakota has been ranked as the top Dynasty Trust state in the nation.
- No State Income Tax: South Dakota does not impose any form of taxation (income, dividend interest, capital gains) on these trust assets so there can be additional compelling tax savings for clients and their families.
- Asset Protection: South Dakota’s asset protection statute has consistently been recognized as among the best and strongest in the nation. Whether a self-settled or third-party asset protection trust, this powerful protection tool allows clients to shield assets from third-party liability and lawsuits, while permitting settlors to retain some control over the trust assets and enjoy a discretionary benefit during their lifetime. With its two year “look-back” fraudulent conveyance statute, South Dakota’s provision is among the shortest in the country.
- Privacy: South Dakota has the most robust privacy trust laws in the nation, with a total, non-discretionary seal on trust information forever, allowing for increased privacy and confidentiality protections. Most states do not have privacy statutes specific to trusts relative to keeping private information out of the public domain or who can be granted information about a trust’s existence or details. Mandated and guaranteed by law, South Dakota unequivocally has the most robust privacy law in the nation.
- Direction and Control: Powerful trust planning tools, such as the Directed Trust and Trust Protector, allow settlors of trusts, beneficiaries, and their advisors to maintain tremendous direction and control over vital aspects of trust creation, administration, and modification, through the use of South Dakota’s powerful decanting statute, considered the best in the nation.
- Modern Trust Law: Modern trust laws, available only in progressive trust law jurisdictions such as South Dakota, have revolutionized trust formation and administration in the United States. The availability of the Special Purpose Entity, as well as the Community Property Trust and Family Advisor (all planning tools not available in other U.S. trust jurisdictions) are just a few of South Dakota’s modern trust laws that rank that state as a top-tier trust jurisdiction.
We encourage you to view Bridgeford Trust Company’s comparison chart of the leading top-tier U.S trust jurisdictions and where they rank in terms of progressive trust topics and laws that distinguish South Dakota as the best U.S. trust jurisdiction in the overall analysis.
For more information on SLATs and how they combine with South Dakota’s modern trust laws to create a powerful planning opportunity for advisors and their clients – even in times of uncertainty – please contact us via our contact page or by calling (605) 224-9189.
