A trust is a legal arrangement in which a trustee holds assets on behalf of one or more beneficiaries. The trustee has a fiduciary duty to follow the terms of the trust and manage the assets prudently in accordance with the intent of the person(s) who established the trust (the grantor(s)/settlor(s)).

There are various types of trusts, including:

• Revocable Living Trusts: Can be changed or revoked by the grantor during their lifetime; the grantor may serve as trustee.
• Testamentary Trusts: Created through a will and take effect only after the grantor’s death.
• Irrevocable Trusts: Cannot be changed once established and may offer additional asset protection and tax benefits.

Common examples of irrevocable trusts include:

• Intentionally Defective Grantor Trust (IDGT)
• Grantor Retained Annuity Trust (GRAT)
• Irrevocable Life Insurance Trust (ILIT)
• Spousal Lifetime Access Trust (SLAT)

Trust administration may involve several roles, including:

Grantor/Settlor

• Creates and funds the trust
• Establishes the trust terms and conditions
• May retain certain powers depending on the trust type

Trustee

• Manages trust assets and operations
• Has a fiduciary duty to the beneficiaries
• Makes distributions according to the trust terms
• Can be an individual, institutional, or co-trustee

Beneficiaries

• Current beneficiaries: May receive benefits or distributions from the trust now
• Remainder beneficiaries: Receive distributions or assets at a later time
• Beneficiaries can be individuals, charities, or other entities

Directed Trust Roles under South Dakota Law:

Trust Protector
A trust protector may provide an additional layer of oversight. Responsibilities may include:

• Removing or replacing trustees and fiduciaries
• Modifying or reforming the trust
• Vetoing or directing trust distributions
• Adding or removing beneficiaries
• Terminating the trust
• Changing the trust’s situs or governing law

Administrative Trustee

• Holds legal ownership of trust assets
• Prepares/signs trust tax returns
• Issues trust statements
• Receives contributions
• Takes direction from committees regarding investments and distributions

Investment Advisor

• May direct the trustee to hold certain assets such as closely held business interests, concentrated stock positions, or real estate
• May direct the administrative trustee for all trust investments

Distribution Committee

• Directs the administrative trustee regarding distributions from the trust

Tax Trust Advisor

• Advises the administrative trustee on trust tax matters, including elections, tax return preparation, positions taken on returns, tax payments, and anticipated tax impact to the trust or beneficiaries

A trust may benefit a wide variety of individuals and families, including:

Business Owners

• Those planning business succession strategies
• Business owners looking to separate business and personal assets

High-Net-Worth Individuals

• Individuals with complex financial portfolios
• Those who want to minimize estate taxes
• Those who want to protect wealth across generations

Parents/Families

• Families with children who have special needs
• Parents who want responsible management of inheritances
• Blended or second-marriage families
• Families with concerns about disagreements among heirs, substance abuse, gambling, divorce, or creditors

Privacy-Conscious Individuals/Families

• Those seeking confidential wealth transfer arrangements

A corporate trustee assumes responsibility for managing your trust assets according to your specific instructions.  This alleviates the time-consuming and burdensome task from your friends, family and loved ones.  It also ensures you have:

• Professionals with expertise to manage the tax and administrative complexities of trusts
• Active investment management of trust assets
• Investment strategies tailored to the unique needs of your trust beneficiaries
• Objectivity that family and friends do not always have in dealing with beneficiaries and controversial family issues
• Assurances of well-tested policies and procedures under regulatory scrutiny, unlike individual trustees
• A continuous trustee ensuring your trust objectives are met
• A published and transparent fee, unlike individual trustees who may need to hire outside financial advisors, attorneys, or accountants, which can result in higher overall costs

South Dakota is widely recognized as one of the most favorable trust jurisdictions in the United States.

Key advantages include:

• No state income tax, capital gains tax, or estate tax
• No Rule Against Perpetuities, allowing perpetual (Dynasty) trusts
• Modern, flexible trust laws, including directed trusts and broad decanting powers
• Strong asset protection statutes to safeguard trust assets
• Industry-leading privacy and confidentiality protections
• A stable and well-regulated trust industry trusted by families and advisors nationwide

These benefits make South Dakota an attractive state for long-term estate planning, wealth protection, and efficient trust administration.

A Dynasty Trust is a long-term, multi-generational trust designed to preserve and protect family wealth for as long as allowed by law. In South Dakota, which has no Rule Against Perpetuities, a Dynasty Trust can last indefinitely, allowing assets to grow tax-efficiently and remain protected from creditors, lawsuits, and divorce. These trusts help reduce estate taxes, maintain privacy, and ensure wealth is managed according to the grantor’s long-term goals for generations.

A trust company may serve in several fiduciary and non-fiduciary roles, including:

• Trustee or Co-Trustee: A fiduciary responsible for administering the trust, managing assets, making distributions, and ensuring the trust is carried out according to its terms.
• Personal Representative: A fiduciary who administers a decedent’s estate, handles probate, pays obligations, and distributes assets as directed in the will.
• Agent: A non-fiduciary role in which the trust company acts at the direction of a fiduciary.
• Custodian: A non-fiduciary role focused on holding and safeguarding assets, executing transactions, and providing reporting while another party directs investments or decisions.