Our founders, after extensive research, determined that a South Dakota charter would best allow us to serve our clients. The state of South Dakota approved First Covenant Trust and Advisor’s charter and the South Dakota Division of Banking provides ongoing oversight and regulatory structure for the protection of our clients.
Our goal is to bring the best law to our clients. Among the several advantages offered by South Dakota are:
Rule Against Perpetuities
Most states still have on their books an old English Common law known as the rule against perpetuities. This law limits the duration of trusts. Some states have modified the old law, but South Dakota is one of a few states that have completely repealed the rule against perpetuities. This is significant because of the estate tax and generation skipping transfer (GST) tax regime. The longer assets can be held in a well-drafted GST trust, the longer those assets can grow shielded from invasive taxation.
South Dakota is a true no income tax state. There is no personal, corporate or fiduciary income tax, no tax on capital gains, dividends, interest, intangibles, or any other income. Further, there is no state personal property tax, ad valorem tax, gift or inheritance tax, or generation skipping transfer (GST) tax.
Asset protection trusts help shield the assets placed in the trust from the reach of creditors. Not only can these trusts preclude the successful creditor, they can prevent litigation by discouraging potential plaintiffs from filing suit.
South Dakota provides creditor protection for self-settled trusts. The settlor can retain income rights, investment control, and be named as a discretionary beneficiary of trust principal. South Dakota has specifically excluded discretionary interests, limited powers of appointment and remainder interests in trust from the definition of property interests.
South Dakota’s business entity protection is also attractive. The exclusive remedy for a creditor against a member of a South Dakota LLC or partner of a South Dakota limited partnership is known as a “charging order.” This simply means that the creditor is limited to distributions made to the defendant member or partner and may not obtain voting rights, power to compel distributions, management powers, or powers to view the organization’s books.
South Dakota has some of the strictest privacy laws of any state. Trust documents in South Dakota are not required to be publically filed. Information filed with the Court in conjunction with proceedings to modify, decant or reform a trust can be sealed.
South Dakota has made trust legislation a priority, writing provisions for directed trusts (allowing family members or other advisors to fulfill certain roles traditionally reserved to the trustee); trust changes, modifications and distributions through the use of trust protectors, investment and distribution committees.