The distinct benefits of establishing a trust in South Dakota

26 June 2024

When it comes to setting up a trust, South Dakota is a popular choice with US residents and non-residents alike, offering a number of unique advantages.

While setting up a trust is a proven way to safeguard wealth and navigate complex structures, when choosing a jurisdiction to establish a trust, having all the relevant information is key.

South Dakota offers a range of progressive trust statutes, making it an excellent choice for establishing a trust for high net worth individuals, families, entrepreneurs, wherever they are based.

South Dakota’s Dynasty Trusts are powerful tools for preserving family wealth across generations by allowing the trust to exist in perpetuity, thereby mitigating federal estate tax liability.

ZEDRA’s Jon Olson outlines some of the key reasons why investors and families choose South Dakota trusts for securing their financial future.

What is a South Dakota Trust?

A South Dakota Trust, just like other Trusts, is a legal arrangement allowing an independent third party, or trustee, to administer the trusts on behalf of a beneficiary. Governed by South Dakota’s favourable trust laws, this type of trust is an attractive option for those looking to preserve their wealth for future generations while maintaining the privacy and planning flexibility afforded by South Dakota law to adapt to changes in future circumstances.

Robust asset protection

South Dakota trusts offer strong protection against creditors. Under South Dakota law, trusts are able to be structured in a way that shields the assets from creditors’ claims, ensuring your assets remain protected for future generations and are not vulnerable to lawsuits or claims against the beneficiaries. The asset protection features of a properly drafted South Dakota trust also allow for the settlor of the trust to continue to receive benefits of the trust assets.

Unmatched privacy

One of the key benefits of a South Dakota trust is the level of privacy it offers. The state does not require public registration of trusts, meaning the details of the trust, including its assets and beneficiaries, remain confidential. This helps to protect the financial affairs of the trust from public scrutiny, providing a high level of privacy in contrast to alternative US jurisdictions. Also, any court proceedings, if necessary, are automatically sealed and the court not available to the public.

Significant tax advantages

South Dakota trusts offer several tax advantages, maximising the value of your assets. These include:

  • No State Income Tax: Trust income is not subject to state income tax, increasing the amount available for beneficiaries.
  • No State Capital Gains Tax: Gains from the sale of trust assets are not taxed at the state level.
  • No Inheritance Tax: Beneficiaries do not pay state inheritance tax on distributions from the trust.

However, federal taxes may apply if the trust is classified as a domestic US tax filing trust.


South Dakota was the first US State to abolish the Rule against Perpetuities in 1983. As such, South Dakota allows for the establishment of ‘dynasty trusts’, which can last indefinitely. This means that the trust can continue to operate and provide for multiple generations of beneficiaries without the need to terminate or restructure, helping to preserve wealth and legacy long into the future.

Flexibility in Trust Laws

The legal framework governing trusts in South Dakota is highly flexible, allowing for modifications to the trust structure as circumstances change. This flexibility can be a welcome advantage when adapting to new family dynamics, changes in financial situations, or evolving objectives of the trust.

Enhancing family governance

South Dakota trusts can incorporate family governance structures, helping to promote family unity and align interests across different generations. This may include setting up family councils, creating mission statements, and establishing rules for decision-making within the family, ensuring a cohesive approach to managing wealth within the family.

Tailored Trust options

South Dakota offers a variety of specialised trusts to meet different needs, including:

  • Charitable Trusts: For those looking to donate assets to charitable causes.
  • Life Insurance Trusts: To manage life insurance policies within a trust framework.

These tailored options ensure that the trust can be tailored to align with specific objectives and circumstances.

Ensuring financial security

Establishing a trust in South Dakota helps safeguard your wealth against uncertainties such as economic downturns, changes in family circumstances, or potential legal challenges. This ensures that your beneficiaries have a stable and secure financial future.

How to set up a South Dakota Trust

Working with local experts, setting up a trust in South Dakota is a straightforward process. Your chosen advisers can work alongside you to define your objectives and find a solution that is tailored to your specific needs.

How ZEDRA can help

Since our beginning, we have been helping high net worth individuals, families, entrepreneurs and investors to secure their futures. Contact Jon Olson to find out more about how we can help you set up a South Dakota Trust.

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