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Privacy and Trust Planning: The South Dakota Advantage

Privacy has always been of paramount concern to wealthy families and is one of the primary reasons why billions of dollars have been and are being moved into South Dakota for trust administration from around the globe.

South Dakota is considered to have the best trust privacy and quiet trust statutes in the U.S., as noted in a recent article appearing in Trusts & Estates Magazine’s December 2021 edition, wherein the authors, Daniel G. Worthington and Mark Merric, note: “Of the top-tier jurisdictions, South Dakota has the best trust privacy laws.”

Most states do not have provisions or laws protecting trust information from being revealed to beneficiaries or to the public during litigation. Furthermore, the few trust privacy laws in existence in the U.S. are not “created equally” making it vitally important for clients and their advisors to understand which jurisdiction offers the best and most powerful privacy protection. For the reasons outlined below, South Dakota clearly has the most robust privacy provisions in the nation rendering that state the trust jurisdiction of choice for wealthy families from all over the world.

Quiet Trust

Most wealthy families want the option of deciding whether to reveal to a child or grandchild that they have a beneficial interest in a trust. However, most states require trustees to inform a beneficiary of his or her beneficial interest in a trust at the age of 18. The top-tier U.S. trust jurisdictions: South Dakota, Nevada, Alaska, and Delaware (as determined by Trusts & Estates Magazine and other industry publications) have addressed this issue and passed rules that allow a trust to waive notice requirements regarding its existence and its assets to beneficiaries. Referred to as a Quiet Trust, settlors of trusts in the above-mentioned states have control over what information is revealed to a beneficiary and when it is revealed, if at all.

South Dakota has the most comprehensive and flexible quiet trust statute in the nation, granting the settlor, trust protector, and the investment/distribution advisor the power to expand, restrict, eliminate, or modify the rights of the beneficiaries to discover information about a trust. Nevada law is silent on the issue of granting the power to these roles, and Delaware and Alaska’s provisions, while similar, place significantly more restriction on the waiver of notice requirement.

Privacy and South Dakota’s Total Seal

South Dakota’s privacy statute provides for a total seal forbidding the release of trust information, including names of settlors, beneficiaries, and the contents of a trust, to the public during litigation. Nevada and Alaska do not have privacy statutes specific to trusts and, as such, privacy is not mandated or guaranteed by law as it is in South Dakota. To the contrary, courts in those jurisdictions consider requests to seal the record on a case-by-case basis, after the commencement of litigation. It is not uncommon for such requests to be denied. Similar to that of Nevada and Alaska, Delaware gives the court discretion over whether to seal trust information. It is important to note that, even if a Delaware court grants the seal, the information is only protected for 3 years. This is a major departure from South Dakota’s statute which seals trust information from the public forever without the need to petition for a court degree.

The desire for privacy and keeping trust information out of the public domain is critically important to most families with wealth, making it an important factor for planners to consider and accentuating the vital importance of evaluating alternative trust jurisdictions in the wealth and trust planning process. For more information about South Dakota’s privacy provisions and how they can be incorporated into a wealth plan, please contact Bridgeford Trust Company’s team online or by calling (605) 224-9189.

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McKonly & Asbury is able to offer an extension of trust and fiduciary services to our clients and friends of the firm through our partnership with Bridgeford Trust Company. As a fully independent trust company chartered in South Dakota, Bridgeford Trust Company provides conflict-free and innovative fiduciary services and progressive U.S. modern trust law solutions around asset protection, privacy, and tax planning to domestic and international families across the country and around the world.

You can learn more about Bridgeford Trust Company and the South Dakota Advantage at www.bridgefordtrust.com.

About the Author

McKonly & Asbury

McKonly & Asbury is a Certified Public Accounting Firm serving companies across Pennsylvania including Camp Hill, Lancaster, Bloomsburg, and Philadelphia. We serve the needs of affordable housing, construction, family-owned businesses, healthcare, manufacturing and distribution, and nonprofit industries. We also assist service organizations with the full suite of SOC services (including SOC 2 reports), ERTC claims, internal audits, SOX compliance, and employee benefit plan audits.

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