Client Alert: South Dakota Expands Directed-Trust Flexibility with New “Tax Trust Advisor” Role

Effective July 1, 2025, South Dakota has once again reinforced its position as the premier U.S. jurisdiction for modern trust design and governance. The state’s 2025 trust bill (SB 69) introduces several forward-looking updates that strengthen its directed-trust framework – especially valuable for clients seeking control, confidentiality, and administrative efficiency without sacrificing fiduciary protection.  The law adds a tax trust advisor to the list of permissible fiduciary advisors and clarifies decanting and modification provisions. These changes are particularly relevant for Florida practitioners who structure domestic or cross‑border trusts for high‑net‑worth individuals (“HNWIs”) and families.

Key Enhancements

1. Creation of a “Tax Trust Advisor.”

South Dakota now formally recognizes a fiduciary advisor empowered to direct the trustee on tax matters, including elections, filings, and reporting positions. The statute clarifies that when acting under such direction, the administrative trustee is treated as an excluded fiduciary and benefits from enhanced liability protection.

2. Streamlined Decanting and Modification Provisions.

SB 69 refines the statutory language and cross-references governing trust modifications and decantings. The changes reinforce South Dakota’s hallmark flexibility to update irrevocable trusts without court involvement or friction.

Importance for Cross-Border Families

HNW families often use directed trusts to balance professional administration with family control over investments and distributions. South Dakota’s new tax trust advisor completes the trio of investment, distribution, and tax advisors, enabling a settlor to surround an administrative trustee with specialized committees.  By expressly shielding the trustee from liability and eliminating a duty to monitor, the new law reduces “shadow-monitoring” risk, lowers fiduciary fees and encourages qualified trustees to accept the role.

Privacy, Family Legacy and Tax Efficiency:

With these changes, South Dakota trusts continue to attract cross-border family interest because they offer:

·      Robust privacy. Trust records and court filings are generally sealed, and the state does not require public filings.

·      Long or perpetual duration. South Dakota permits trusts to last for up to 1,000 years or effectively perpetually, enabling multigenerational planning.

·      No state income or capital gains tax. Combined with a settlor’s absence of federal or state income tax, this offers significant tax efficiency.

·      Strong asset protection laws. The state recognizes self‑settled domestic asset‑protection trusts and protects discretionary beneficiaries from creditor claims.

Applicability to Cross-Border and US-Situs Planning

Many Latin American families use South Dakota as the situs for U.S. trusts due to political stability and creditor protection. SB 69 strengthens governance for cross‑border structures by clearly allocating tax authority to a designated advisor.  For families using corporate trustees, the new statute reinforces that administrative trustees need not monitor tax decisions, which protects them when dealing with global investments. Florida advisors often pair South Dakota directed trusts with Delaware, Nevada or offshore entities to retain investment/distribution control while leveraging South Dakota’s privacy and tax benefits.

Please contact our office to discuss how these enhancements can be tailored to your pre-immigration, tax and estate planning, investment and other objectives to enable greater control over investments, distributions and tax matters while protecting trustees from unwanted monitoring duties. We will work with you to proactively implement a customized trust design incorporating this role to further leverage South Dakota’s flexible laws for new or existing estate plans.