South Dakota is continually chosen as the top regulated Private Family Trust Company (PFTC) jurisdiction in the U.S. and South Dakota Trust Company LLC (SDTC) and SDTC Services (SDTCS) are an industry leader in assisting families with the set-up, operation, administration, and compliance of PFTCs.
Traditionally, families have chosen as their trustees: family members, advisors, and/or commercial trustees with whom they have had personal, professional, or business relationships. PFTCs still allow families to involve these family members, advisors, and institutions within the PFTC, but without the liability of them serving individually. These PFTCs are typically located in South Dakota due to the state’s favorable trust, asset protection, tax, and PFTC laws.
Additionally, South Dakota is not only the most experienced PFTC jurisdiction but it also has the lowest PFTC capital requirements in the U.S., as well as low set-up and maintenance costs. For these reasons many families have established their own South Dakota PFTCs.
A South Dakota PFTC is a South Dakota LLC or corporate entity that is typically 100% owned by the family and qualifies to do business in South Dakota as a PFTC after an application, meeting and approval by the South Dakota Division of Banking. The South Dakota PFTC then works with the non-South Dakota Family Office via service agreements to provide other related services to the family trusts (e.g., investment advisory and management, etc).
Board members and officers of the PFTC LLC, can acquire directors and officers insurance as well as errors and omission insurance, and can serve as trustee within a LLC wrapper versus individually. This eliminates personal liability they may have if named individually as a co-trustee in a family member’s trust document.
The PFTC can then engage the non-South Dakota Family Office provide investment, asset allocation, and other services. Families may also place their PFTC in a South Dakota Dynasty Purpose Trust with an unlimited duration to perpetuate its existence. South Dakota has a perpetual Purpose Trust statute with a separate rule against perpetuity (RAP) provision. Many advisors claim a separate RAP is necessary for the purpose trust since it does not have any beneficiaries. The purpose trust’s sole purpose is to hold and care for the PFTC. South Dakota’s unlimited duration dynasty statute dates back to 1983. The statute follows the Murphy case which the IRS acquiesced in 1979. South Dakota is one of the few states that can make these claims.