How to Create a Living Trust in South Dakota

A living trust can be a powerful tool for building a comprehensive estate plan and ensuring your assets are managed and distributed according to your wishes. Since estate and inheritance laws vary by state, it’s important to understand the specific rules that apply in South Dakota. We’ll give an overview of how to create a living trust in the state and key considerations for deciding whether one fits your needs. For help navigating your estate planning options, or to get support with investing or retirement planning, consider working with a financial advisor.

What Is a Living Trust?

A living trust is a legal arrangement that lets you transfer control of your estate to a trustee, who then distributes your property to any beneficiaries you’ve named. The trust goes into effect as soon as you create it, and it gives you the authority to decide at what age or date your beneficiaries will receive your assets.

There are also two types of living trusts. These are revocable living trusts and irrevocable living trusts. Revocable trusts allow the trust creator, or grantor, to modify or revoke the provisions in the trust without the approval of the trust’s beneficiaries. Irrevocable trusts cannot be altered or terminated by the grantor unless all of the beneficiaries approve.

How to Create a Living Trust in South Dakota

Forming a living trust in The Mount Rushmore State requires a number of steps. Here’s what you’ll need to do:

1. Choose the trust that best suits your financial situation: You’ll want to use an individual trust if you’re single, but you should consider using a joint trust if you’re married. With a joint trust, each spouse can include separate and shared property in the trust. Married couples can also use two individual trusts.
2. Take inventory of your property: This will help you determine exactly what you want the contents of your trust to be. Examples include real estate, stocks, retirement accounts, heirlooms and bank accounts.
3. Choose a trustee to manage your trust: If you decide to act as the trustee, you’ll have to select a successor trustee to manage your estate after your incapacitation or death.
4. Create the trust document: You can use an online program to do this, or you can hire an estate planning attorney.
5. Get the trust document notarized: Next you’ll need to sign the trust in front of a notary public.
6. Transfer property into the trust to fund it: This requires paperwork, but it ensures that your trustee can successfully distribute your assets to the beneficiaries you’ve chosen.

A financial advisor can help you determine if a living trust could be helpful in your situation.

How Much Does It Cost to Create a Living Trust in South Dakota?

You’ll have a couple of options for creating a living trust in South Dakota, but the method you choose will affect how much you spend. If you’d rather create the trust yourself, you’ll spend up to a few hundred dollars, but DIY estate planning also presents some risks.

The other option is to hire an attorney who specializes in living trusts. This method is more expensive, and you may spend at least $1,000 depending on your attorney’s fees. This could be the safer route if you’re not comfortable with creating the trust document on your own.

Living Trusts vs. Wills

Even if you’ve already formed a living trust, you can still benefit from incorporating a will into your estate plan. If there are any assets you didn’t include in your trust, you can assign them to a will. This gives you more flexibility with distributing your assets after death. Wills also allow you to perform actions that trusts cannot. These include:

• Naming an executor
• Leaving instructions for taxes and debt
• Establishing guardianship for minors
• Choosing managers for children’s property

The following chart highlights some similarities and differences between a living trust and a will:

Living Trusts vs. Wills

Living Trusts and Taxes in South Dakota

Taxes generally won’t affect your living trust, but you should still take note of South Dakota’s estate tax and inheritance laws. Thankfully, South Dakota doesn’t have an inheritance or estate tax. However, for 2022, the federal estate tax applies to estates worth more than $12.06 million for individuals and $24.12 million for married couples.

If your estate comes in smaller than the marks above, it won’t owe anything to the federal government. But should your estate exceed the federal threshold, you’ll have to pay estate taxes even if you don’t use a living trust.

Why Consider a Living Trust in South Dakota

Creating a living trust can offer several advantages when it comes to managing your estate. One of the primary benefits is avoiding probate, the legal process through which a court validates a will and oversees the distribution of assets. Probate can be time-consuming and costly in many states, but South Dakota has adopted the Uniform Probate Code, which significantly streamlines the process. Additionally, if your estate is valued under $50,000, the state offers an even simpler probate procedure that may make a living trust unnecessary for smaller estates.

However, South Dakota law also includes a “right of election” for surviving spouses. This means that even if your spouse is not listed as a beneficiary, they may be entitled to claim a portion of your estate. Specifically, a surviving spouse has either nine months from the date of death or four months from the start of probate to claim their elective share. This provision could override certain aspects of your trust unless your estate plan accounts for it.

Who Might Benefit From a Living Trust in South Dakota?

While South Dakota’s streamlined probate process reduces the urgency for some residents to create a living trust, there are still compelling reasons to consider one. If you have a moderately sized or complex estate—or if you wish to maintain privacy by avoiding probate court altogether—a living trust may be worth the added effort and cost. It’s also useful for those who want more control over how and when assets are distributed, particularly in cases involving minor children or beneficiaries who are disabled.

That said, individuals with very simple estates, especially those worth less than $50,000, may find South Dakota’s simplified probate process more than sufficient. As always, it’s a good idea to consult with a financial advisor or estate planning attorney to weigh your options and determine what’s best for your specific situation.

Bottom Line

South Dakota uses the Uniform Probate Code, so it may be better to use the probate process instead of a living trust. If you prefer a living trust, an attorney can help you create the document, although hiring an attorney will cost more than doing it yourself. No matter which route you take for estate planning, remember that South Dakota grants a surviving spouse the right of election. Whether you decide to use a living trust or a will, your spouse will inherit a percentage of your assets following your death.

Estate Planning Tips

• Creating an estate plan doesn’t have to be difficult. A financial advisor can help you establish a strategy to meet your goals. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Budgeting is one way to preserve your property and assets throughout your life and after death. This can help you save money, while taking care of any regular expenses you have. If you’re not sure where to begin, consider using our budget calculator.

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