There is a reason that so many of the Forbes 400 and other wealthy families have chosen to situs their PFTCs and trusts in South Dakota. Many families assume all of the PFTC and dynasty trust states are the same, when there are actually dramatic differences between both the trust and PFTC jurisdictions. Many of these points are discussed in this website.

South Dakota has been a favorable boutique trust state for the wealthy since 1983. The legislature has proactively emphasized modern trust laws that answer the needs of wealthy families better and longer than any other state. The current PFTC laws combined with the legislative awareness and responsiveness are just a few of the reasons why South Dakota is the most favorable regulated PFTC state in the U.S. Some of the other compelling reasons are the unique South Dakota trust and tax statutes which are listed below:

1. State Legislature

  • Extremely responsive state legislature for regulated family trust companies and South Dakota trust laws.

2. Application process:

  • Short time frame 3-6 months ($5,000 application fee);
  • Application is private;
  • Public Notice (all states have this);
  • $1,000,000 fidelity  bond;
  • At least 3 board members (1 from South Dakota), no more than 12 total;
  • SD allows for interstate administration in family’s home state.

3. Low capital requirement:

  • Only $200,000 in SD (lowest required by any state).

4. Friendly regulatory authority:

  • SD examination; one every 36 months (PFTCs);
  • Onsite – Policies and Procedures Manual, LLC and other organizational documents, Board meeting minutes, etc.;
  • Most other books and records – available electronically;
  • SDTCS assists with PFTC examinations and generally charges a flat fee.

5. Board meetings:

  • Quarterly (SD member present in SD as corporate agent – SDTCS serves this role);
  • Telephonic attendance depending on the types of trust being administered; generally, most families attend at least one meeting per year in South Dakota (although this is not required), usually in the summer;
  • The South Dakota board member does not need to hear private family matters; only needs to deal with PFTC/banking portion of the board meeting. Balance of meeting may be executive session.

6. Physical office requirement/corporate agent:

  • SDTCS serves as SD resident board member, attends quarterly board meetings, provides office space and South Dakota administrative assistant, collects mail and forwards, answers phone – total costs for all these services average approximately $3,500 per month.

7. Trust administration – SDTC’s experience:

  • SDTC can act as trustee’s agent and provide a trust officer for trust administration for South Dakota law trusts or other state law trusts; [or]
  • Trust administration can be done in another state, but without the benefit of SD law and taxes. (This may present additional regulatory requirements; tax and legal counsel should also be consulted.)

8. Regulated vs. Unregulated PFTCs:

  • Regulated PFTC can provide better liability protection compared to unregulated PFTC;
  • More difficult to pierce the corporate veil;
  • Regulated PFTCs promote the integrity of tax sensitive distributions and estate planning;
  • Regulated PFTCs also result in SEC exemption.

9. SEC exemption:

  • Family Offices establishing PFTCs may be exempt from SEC registration;
  • SEC exemption allows for common trust funds and business trusts with PFTC.

10 . South Dakota has a family money lending company statute, utilizing top lending laws in the U.S.:

  • A South Dakota money lending company is both inexpensive and easy to establish with SDTC as an agent and acts as a nice complement to a PFTC;
  • Utilizing top lending laws in the U.S.

11. Captive Insurance Companies

  • South Dakota is also one of the top jurisdictions for captive insurance companies, which can provide a cost-effective way to deal with a family’s property and casualty insurances as well as provide numerous tax benefits.