South Dakota trusts have been around for years, but recently they have been brought to the attention of individuals outside of the estate planning community. Bloomberg recently ran an article, Little Tax Haven on the Prairie by Zachary R. Mider (January 9, 2014), which discusses the creation of South Dakota trusts by some of the richest families in the world. In the last four years the money administered by South Dakota trust companies has tripled to $121 billion, almost of all it from outside the state.
The initial attraction for creating trusts in South Dakota was the ability to create trusts that can continue indefinitely – for as long as the money will last – free of estate tax. But now, with the lower estate tax rates and higher state income tax rates, much of the buzz relates to the fact that South Dakota does not tax trust income. If you are in a state like New York or California, the income tax savings can be a huge advantage.
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