Part I of this article provided an overview of South Dakota trust law and some of the advantages of creating a trust in our state. Part II provides some additional advantages that a South Dakota dynasty trust may provide to you and your heirs.
Must the grantor of the trust be a resident of South Dakota?
No. The benefits of a South Dakota dynasty trust are available to residents and non-residents. The only requirement is that the trustee be a South Dakota resident and that South Dakota laws apply to the trust. However, administration of the trust and custody of the assets should have as many South Dakota connections as possible.
What is the financial benefit of a dynasty trust?
For some families, it can save taxes. Specifically, as family wealth is passed to later generations, there can be federal estate taxes due on the assets transferred to each succeeding generation. If a trust of over $5 million is passed through three generations, the cumulative total of estate taxes paid could reduce the value of the asset available to the fourth generation by over 70%. However, if the assets were left to a dynasty trust to benefit several generations, there would be no estate taxes at each generational change as the trust would just continue distributing benefits to the 2nd, 3rd, and 4th generation beneficiaries.