A Step-by-step Guide to Make a Living Trust in South Dakota

Creating a living trust in South Dakota is essential to estate planning. It allows you to protect your assets, maintain control, ensure a smooth estate transfer to your beneficiaries, and avoid probate.

What is a Living Trust?

A living trust is merely a trust permitting the grantor or the creator of the trust to keep control of the trust assets during their lifetime and distribute the property to their selected beneficiaries upon death.

However, not all assets can be added to a living trust. For instance, grantors cannot add assets like retirement accounts or life insurance to a living trust.

Ideally, adding as many assets as possible to a trust is advisable. Grantors must name a trustee to handle the trust property on their behalf. A trustee should be trustworthy and capable of managing the property as instructed in the living trust.

Grantors can name themselves trustees and choose a successor trustee to take control after their death. This ensures the ongoing management and protection of the assets, followed by the distribution of assets to the selected beneficiaries according to the instructions specified in the trust.

Why do you need a Living Trust in South Dakota?

It is beneficial for individuals to have a living trust in South Dakota for various reasons.

Grantors can transfer their property to their loved ones by creating a living trust upon their demise. It has the potential to save the beneficiaries much time, inconvenience, and expenses.

However, if the property is passed on through a Will instead, it could be subjected to a lengthy probate process that may last months to years, resulting in court expenses and legal fees.

Property distributed through a trust can be promptly transferred to beneficiaries, often without requiring the involvement of an attorney.

Types of Living Trusts

Revocable Living Trusts

A revocable living trust allows for modifications or revocation at any time.

Grantors may maintain control over the trust and its assets in their lifetime by designating themselves as the "trustee" and choosing a "successor trustee" to administer the trust and distribute its property to beneficiaries upon the grantor's death.

However, in the case of a shared living trust, the successor trustee assumes control after the passing of both spouses.

Irrevocable Living Trusts

Irrevocable trusts cannot be revoked or modified once the trust documents are signed.

They serve as valuable tools for achieving specific objectives, such as tax reduction, but entail relinquishing ownership and control over the trust property.

How to Make a Living Trust in South Dakota

Individuals must follow the steps below to make a living trust in South Dakota successfully.

Select the Kind of Trust Best Suitable for Your Situation

The first step to making a living trust is to decide the type of trust best suitable to the financial situation of the grantor.

A single living trust is suitable for single individuals, while couples making a trust may make a joint or single living trust individually.

A joint trust allows couples to include both individual and jointly owned property.

Assess your Assets

Grantors must evaluate all their assets to identify the assets to be included in the trust. It helps grantors develop a comprehensive overview of the assets held within the trust, ensuring a clear understanding of the future benefits the designated beneficiaries will receive.

Decide on the Trustee and a Successor Trustee

Grantors must decide on a trustee to manage the property of the trust. Grantors can name themselves as trustee of the trust. However, they will need to name a successor trustee to manage the property on their behalf in the event of death or if the trustee has become incapacitated.

Decide Beneficiaries

In addition to deciding the trustee of the trusts, grantors must also decide the potential beneficiaries of the trust.

Beneficiaries of a trust may include one or a combination of family members, friends, or organizations.

Make the Trust Document

Once the assets to be included, the trustee, and beneficiaries have been decided, grantors may proceed to make the trust document.

The trust document can be made using online resources available or by hiring an experienced professional to draft the trust document.

Sign the Document

After the trust document is created, grantors need to sign it in the presence of a notary public and get the trust document notarized.

Transfer Real Property

After the document has been signed, grantors must proceed with the transfer of ownership.

Updating the ownership information is essential to acknowledge that the trust holds the property.

This process entails transferring the title into the trust's name or adding the trust as the owner. Doing so establishes a legal connection between the trust and the property it holds.

Although it requires some paperwork, this ensures that the assets can effectively be distributed to the designated beneficiaries per the wishes of the grantor.

What is the Difference Between a Living Trust and a Will?

A living trust and a Will are essential financial tools for an effective estate plan. However, there are certain differences between both tools.

In many ways, making a Will in South Dakota can be beneficial. For instance, a Will allows testators to leave specific instructions like appointing legal guardians to care for minor children, appointing legal representatives to manage the property for minor children, ensuring pet care, etc.

Writing a Will can also help to secure properties that have not been included in trust assets or have been acquired after creating the trust.

Unlike a Will in which assets are distributed after the testator's death, creating a living trust can ensure beneficiaries receive the assets when mentioned in the trust document until which the trust may manage the assets.

Creating a living trust can also help grantors avoid the probate process, which is typically time-consuming, and prevent their assets from being on public records.

Does a Living Trust Reduce Federal Estate Tax in South Dakota?

Creating a living trust in South Dakota does not typically reduce federal estate taxes.

South Dakota does not have its own estate or inheritance tax. However, estates crossing a certain value may be subject to federal estate tax.

Closing Thoughts

Creating a living trust in South Dakota is a powerful tool for estate planning. It helps protect your assets, maintain control, and ensure a seamless estate transfer to your loved ones.

Establishing a living trust can proactively secure your family's future and preserve your legacy.