What is a trust in South Dakota?

A trust agreement in South Dakota is a document that sets out the rules that you want followed for property held in trust for your beneficiaries. Common objectives for creating trusts are to reduce the estate tax liability, to avoid probate, and to protect property in your estate.

Think of a trust as a special box in which ordinary property from your estate goes in and, as the result of some type of transformation that occurs, takes on a new identity and often is bestowed with super powers: immunity from estate taxes, resistance to probate, and so on.

Suppose that you want to set up a trust. Just like with a baking recipe, you need to make sure you have everything you need before you start. To create up a trust, you need these basic ingredients:

• Person setting up the trust. The person is commonly known as the trustor, though you may sometimes see the terms settlor or grantor.

• Objective of the trust. You use different types of trusts to achieve a variety of specific estate-planning objectives. You can use some trusts for a single estate-planning objective, while others help you achieve more than one goal.

• Specific kind of trust. Trusts come in many different varieties. Regardless, when you’re setting up a trust, you need to decide what type of trust you want and make sure that you follow all the rules for that particular type of trust to make sure that it’s proper and legal, and carries out your intentions.

• Property. After you place property into a trust, that property is formally known as trust property.

• Beneficiary. Just like with other aspects of your estate plan (your will, for example), a trust’s beneficiary (or, if more than one, beneficiaries) benefits from the trust in some way, usually because the person or institution will eventually receive some or all of the property that was placed into trust.

• Trustee. The person in charge of the trust is known as the trustee. The trustee needs to understand the rules for the type of trust he is managing to make sure everything in the trust stays in working order.

• Rules. Finally, some of the rules that must be followed are inherently part of the type of trust used, while other rules depend on what is specified in the trust agreement.