By Jon Crow
Effective July 1, 2016, the South Dakota Legislature passed a new law which continues to keep South Dakota on the fore front of preferred trust jurisdictions in the country. The law allows for the creation of a new type of trust called a “Community Property Special Spousal Trust”. Under this law, trusts can be formed by one or both spouses with both spouses as beneficiaries. Said new trusts may be revocable or irrevocable in format.
The following are the main features of this trust:
– This new law allows for community property treatment of assets transferred to the trust to receive a 100% step-up in basis of assets at the death of the first spouse. This is a key feature as it allows for property to be sold after the death of the first spouse without incurring any capital gains tax. We believe that this is a powerful new planning tool for spouses that live in separate property states.
– This type of trust can be designed as a dynasty trust which avoids federal estate taxation on trust assets over subsequent generations in to perpetuity.
– Both residents and non-residents may take advantage of this planning technique.
– The statute requires that at least one trustee be a “qualified person” which essentially means a South Dakota resident trustee, a service offered by Meristem Trust Company.
If you have any questions about the new Community Property Special Spousal Trust or if want to learn more about the benefits of South Dakota’s jurisdiction, please contact Jon Crow (email@example.com) or Anne Novak (firstname.lastname@example.org).