A living trust in South Dakota allows you to continue to have possession of your assets while they are owned in trust during your life. They are then distributed after your death according to your wishes. A revocable living trust (sometimes known as an inter vivos trust) can be an important estate planning tool.
Living Trusts in South Dakota
When you choose to establish a South Dakota living trust, you are the trust’s grantor and you will create it and place ownership of your assets into the trust. It is generally most beneficial to place as many assets as possible into the trust. Some, such as life insurance or retirement accounts, cannot be transferred to a trust. The assets in the trust will be managed for your benefit during your life by the trustee. You can select anyone you wish to be your trustee, but most people simply select themselves. If you choose yourself, you will also need a successor trustee who can take over after your death. At that point, the trustee will continue to manage and protect the assets and distribute them to your beneficiaries after your death (as per your instructions). A revocable trust can be altered at any time while an irrevocable living trust is permanent.
Your living trust South Dakota allows you to avoid probate for all trust assets. Probate is a court procedure required for all wills. The court must approve and enact the will’s provisions. This can take months and can be expensive, involving court fees as well as the costs of an attorney and executor. Assets passed through a will cannot be transferred to the beneficiaries until the probate process concludes. A trust, however, can be effective immediately with no court oversight. Your trust allows you to bypass probate in any states in which you own property.
South Dakota uses the Uniform Probate Code, so its probate procedures are somewhat streamlined if you choose to use probate. There is also a faster small estate procedure available for estates valued at less than $50,000. This process is less expensive than creating a trust, but does not offer any trust benefits.
In South Dakota, a surviving spouse has what is called a right of election. This allows a spouse to claim a percentage of the deceased spouse’s estate even if the survivor has been disinherited. Assets in a living trust are subject to the right of election in South Dakota.
Do I Need a Living Trust in South Dakota?
Living trusts provide a variety of benefits that may appeal to you. Creating a living trust in South Dakota gives you control over your assets during life and after death. While your assets are owned in the name of the trust, you will continue to use them as you normally would, so nothing in your daily life changes. After your death, the assets are protected, managed by the trust, and distributed to your beneficiaries at the specific dates you select. Assets can be transferred immediately after death or at some point in the future that you choose. It is common to keep assets in the trust until beneficiaries reach specific ages. This contrasts with a will which must distribute assets at one point in time as soon as probate concludes.
A living trust offers a veil of privacy for your affairs. The trust is never public record, unlike a will which enters the public record when it is probated. The assets in the trust, the terms of the trust, and the names of the beneficiaries and their inheritances are not disclosed. Trusts are also more challenging to contest, keeping your directives intact.
Your revocable living trust protects you should you become mentally incapacitated. All of your assets are already controlled, owned, and managed by the trust and a conservatorship proceeding is likely unnecessary. While a durable power of attorney can be rejected, a trust cannot be. Your financial life is protected by the trust.
Living Trusts and Estate Taxes in South Dakota
While there is no estate or inheritance tax in South Dakota, the federal estate tax applies to estates worth more than $5 million. Living trust assets are counted towards this. It is possible to avoid estate tax using a specially constructed trust known as a marital trust (sometimes called an AB trust or QTIP trust). A marital trust passes assets from a deceased spouse to the surviving spouse without incurring tax. Your living trust will not be shielded when computing your eligibility for Medicaid and it can’t hide assets from your creditors.
How to Create a Living Trust in South Dakota
If you would like to create a living trust in South Dakota, you need to create a written trust agreement and sign it before a notary public. To make the trust effective, you must transfer your assets into it. A revocable living trust is a popular estate planning option. It may be an option that will work for you.
If you are ready to create a South Dakota living trust, LegalZoom can help. Get started by answering a few simple questions. LegalZoom will review your answers and send your complete living trust package by mail.