Changing situs
Moving a trust to South Dakota.
Some South Dakota trusts were not initially created here. They were drafted somewhere else, years ago, under law that no longer serves the individual/family. Moving a trust to South Dakota is ordinary work, and it is usually done without a courtroom.
The three common routes
Three common ways in. Only one is needed.
Change of situs under the document
Many instruments already contain a provision allowing the trustee, a trust protector, or the beneficiaries to move the trust's administration and change the governing law. Where that language exists, moving is a matter of appointing a South Dakota trustee and documenting the change.
- When this applies
- The instrument contains situs and governing law provisions, and the parties named in them agree.
Decanting into a new trust
South Dakota permits a trustee with discretionary distribution authority to distribute the assets of an existing trust into a new one with better terms. The old trust ends, the new one continues, and the family gains the provisions the original lacked.
- When this applies
- The trustee holds discretion over distributions and the existing terms cannot be changed directly.
Nonjudicial modification by agreement
Where the interested parties agree, South Dakota allows the terms of a trust to be modified by written agreement, without a petition and without a hearing. The agreement is binding and the proceeding stays private.
- When this applies
- All interested parties consent, and the modification does not defeat a material purpose of the trust.
How it runs
Five steps, and most of them are ours.
The document is read
The instrument, its amendments, and the current trustee arrangement. This determines which route is available.
The tax position is modelled
Federal treatment, your home state's rules on trust income, and whether GST-exempt assets need protecting.
A trustee is selected
You choose the trustee. This firm does not serve as trustee.
Documents are drafted
The situs change, decanting instrument, or modification agreement, plus trustee appointment and resignation paperwork.
Assets are retitled
Holdings transfer to the new trustee, coordinated with your advisor, who ordinarily keeps managing them.
Before the first call
What to bring
None of this needs to be organized. Send what you can find, and the gaps get sorted out in conversation.
- The trust instrument, including every amendment and restatement
- The name of the current trustee and the state administering the trust
- The most recent trust income tax return, if one is filed
- A rough picture of what the trust holds and roughly what it is worth
- The states where the settlor and the beneficiaries live
- Whatever prompted the question in the first place
Worth knowing first
Four reasons a move can go wrong
These are the issues that turn a straightforward change into an expensive one. Each is manageable when it is caught early.
Grandfathered assets can lose their status
A trust that predates the generation-skipping transfer tax, or one that is fully GST-exempt, can lose that treatment if it is decanted carelessly. This gets checked before anything is drafted, not after.
Your home state may follow the trust
Several states tax trust income based on where the settlor or beneficiaries reside, regardless of where the trust is administered. Moving does not always end that.
The document may not permit it
Some instruments bar a change of situs outright, or condition it on consents that are no longer obtainable. Where that happens, a court petition may be necessary.
Material purpose limits what can change
Nonjudicial modification cannot defeat a material purpose of the trust. A settlor's stated intent constrains how far the terms can be rewritten, even with everyone agreeing.
Next step
Send the trust. That is the whole ask.
Reading an existing instrument and telling you which route applies, whether it is worth doing, and roughly what it costs is the first conversation rather than a billed engagement.
Initial consultations are provided without charge.