South Dakota vs. Minnesota Trust Law Desk Reference Guide Advantage South Dakota Minnesota For over 30 years, SD has been Like many states, MN has one of the best places to locate attempted to catch up to SD by a trust. A unique and active implementing the Uniform legislative trust committee, Trust Code. However, the Trust Location (Situs) favorable Legislature and difference is still clear and governor support continues to distinct, and the state does not rank SD as a top tier trust have the stability or support jurisdiction state; as verified by that SD enjoys from the industry leaders. government. In addition to many other taxes, MN taxes its trusts. In 2018, the There is no state personal, Fielding v. Commissioner of corporate, or fiduciary income Revenue decision highlighted tax, as well as no state tax on this major difference, holding State Taxes capital gains, dividends, that a trust set up as a MN trust interest, intangibles, or any may not need to stay a resident other income. This equates to trust for tax purposes for the NO state taxes on trust income. entire length of the trust (depending on circumstances). A Dynasty Trust has unlimited possibilities because there is no Rule Against Perpetuities MN has a Rule Against The Dynasty Trust - Legacy (abolished in 1983). Dynasty Perpetuities. By statute, all Trusts avoid federal estate and non-vested interests must vest Planning for Generations income taxation on trust assets (pass) 21 years after death of an because there is no forced asset individual or 90 years after its distribution and the bonus of creation. added asset protection for each generation. SDCL § 43-5-8 SD has one of the strongest trust privacy seals in the country. It is permanent and MN does not have an absolute Privacy Laws absolute. Further, it does not privacy seal and a trust in MN require a trust to be filed must report income activity for publicly or reported to any state tax purposes. public entity. SDCL § 21-22-28 SD allows married couples (residents or non-residents) to elect into community property status. Creating a "Special Spousal Property Trust" can As a common law state, MN create a community property does not allow married couples trust. This receives a 100% step the option of electing into up in cost basis at the death of community property status. This means no double step up Special Spousal Trusts the first spouse, and then again at the death of the second in basis is available. Instead, at (double step up). This can the death of the first spouse, eliminate or reduce capital the jointly owned assets are gains tax and allow for re- only stepped up one half (50%) depreciation of assets, such as of the deceased spouse's machinery and other interest. depreciable assets. SDCL Chapter 55-17 South Dakota vs. Minnesota Trust Law Desk Reference Guide Advantage South Dakota Minnesota In 2007, SD went beyond its longstanding spendthrift trust Third Party Discretionary statutes and enacted a new MN does allow for some asset Support Trusts - Asset statutory approach of third- protection but does not allow Protection party discretionary asset the protections available from protection that ranks among SD law. the top asset protection states. SDCL § 55-1-24 through 55-1-43 Created and funded by the grantor, the DAPT is a formidable planning strategy that provides a legal shield from Domestic Asset Protection creditors, third party liability, and lawsuits; while still Trusts - Asset Protection MN does not allow Domestic permitting grantors to retain (DAPT) Asset Protection Trusts. some control of the trust assets and enjoy discretionary benefit during their lifetime. SD is consistently ranked in the top rankings for DAPT protections. SDCL Chapter 55-16 MN does allow a trust provision to limit the common law duty In SD, the grantor needs no to keep beneficiaries reason to keep a trust private, reasonably informed; however, the grantor can waive the Quiet or Silent Trusts the statute is not as strong and trustee's obligation to notify a will not preclude the trustee beneficiary of the existence of from seeking judicial approval the trust or having to provide a of trust administration and copy. SDCL § 55-2-13 therefore provide notice to beneficiaries. MN allows decanting. However, it has limitations including; Decanting allows for a reset notice must be given to button to be pushed by moving beneficiaries, cannot decant assets from one trust to another with an ascertainable standard when there is a change in Decanting discretionary trust, cannot circumstances. SD is ranked remove mandatory income consistently as one of the top interest, cannot allow power of decanting jurisdictions with appointment in second trust to perhaps the greatest amount of non-beneficiary, and cannot flexibility. SDCL § 55-2-15 accelerate a remainder beneficiary's interest. SD has one of the highest ranked directed trust statutes MN has directed trusts, but the in the country. It allows the statute is not as protective. In unbundling of asset Directed Trusts MN one can impose liability management and trust upon the trustee for gross administration. This gives more negligence and willful control to the family and limits misconduct. the liability of the trustee. SDCL Chapter 55 -1B This desk reference was created May 1, 2019 and is a courtesy from Cornerstone Private Asset Trust Company, LLC. CORNERSTONE PRIVATE ASSET TRUST COMPANY, LLC 2101 W. 41st Street, Suite 2000, Sioux Falls, SD 57105 | 4470 W. 78th St. Suite 200, Bloomington, MN 55435 www.cornerstonetrust.net .