Changes to Existing Law

26.464.15 26.464.16 101st Legislative Session 100 2026 South Dakota Legislature Senate Bill 100 Introduced by: Senator Crabtree Underscores indicate new language. Overstrikes indicate deleted language. ENROLLED AN ACT ENTITLED An Act to revise provisions related to trusts. 1 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA: 2 Section 1. That a NEW SECTION be added to chapter 55-1: 3 Unless the terms of the governing instrument expressly provide that a trustor may 4 not be reimbursed by a trust for the trustor's personal income tax liability, if the trustor 5 is treated under 26 U.S.C. §§ 671 to 678, inclusive (January 1, 2026), as the owner of all 6 or part of the trust, the trustee, other than a trustee who is the trustor or a person who 7 is a related or subordinate party with respect to the trustor within the meaning of 26 8 U.S.C. § 672(c) (January 1, 2026), may, in the trustee's sole discretion, or at the direction 9 or with the consent of a trust advisor or trust protector, who, in either case, is not the 10 trustor or a person who is a related or subordinate party with respect to the trustor, pay 11 directly to any taxing authority, or reimburse the person liable for, any tax imposed by a 12 taxing authority on the person by reason of the person being treated as the owner of all 13 or any portion of the trust property pursuant to 26 U.S.C. §§ 671 to 678, inclusive 14 (January 1, 2026). 15 If there is a policy of insurance on the trustor's life held in the trust, the cash value 16 of the policy, or the proceeds of any loan secured by an interest in the policy may not be 17 used to reimburse the trustor or to pay an appropriate taxing authority on the trustor's 18 behalf. 19 The power to make payments to, or for the benefit of, the trustor under this 20 section, or the trustee's, trust advisor's, or trust protector's decision to exercise or direct 21 the exercise of the power in favor of the trustor, may not cause the trustor to be treated 22 as a beneficiary of the trust for purposes of § 55-1-36.1 or any other law of this state. 23 The provisions of this section do not apply if the application of this section would 24 disqualify a trust for, or reduce the amount of, a marital or charitable deduction otherwise 25 available to any person for state or federal income, gift, or estate tax purposes. 26 26.464.15 26.464.16 2 100 Underscores indicate new language. Overstrikes indicate deleted language. SB100 ENROLLED A trustee, trust advisor, or trust protector is not liable to any person for the exercise 1 of, or the direction or consent to exercise, the power to reimburse or not reimburse a 2 trustor for tax payable by the trustor pursuant to this section. The exercise of, or the 3 direction or consent to exercise, the power to reimburse or not reimburse a trustor for tax 4 payable by the trustor pursuant to this section is not a breach of fiduciary duty to any 5 person. 6 This section applies only to trusts created on or after July 1, 2026, and to any trust 7 for which the principal place of administration is moved to this state on or after July 1, 8 2026. 9 For purposes of this section, the term "trustor" includes a trustor, settlor, 10 trustmaker, or any person treated under 26 U.S.C. §§ 671 to 678, inclusive (January 1, 11 2026), as the owner of all or part of the trust. 12 Section 2. That § 55-2-15 be AMENDED: 13 55-2-15. Unless the terms of the governing instrument expressly provide 14 otherwise, if a trustee has discretion under the terms of a governing instrument to make 15 a distribution of income or principal to or for the benefit of one or more beneficiaries of a 16 trust (the "first trust"), whether or not restricted by any standard, then the trustee, 17 independently or with court approval, may exercise such discretion by appointing part or 18 all of the income or principal subject to the discretion in favor of a trustee of a second 19 trust (the "second trust") under a governing instrument separate from the governing 20 instrument of the first trust. Before exercising the discretion to appoint and distribute 21 assets to a the second trust, the trustee of the first trust shall determine whether the 22 appointment is necessary or desirable after taking into account the purposes of the first 23 trust, the terms and conditions of the second trust, and the consequences of the 24 distribution. 25 For the purposes of this section, a trustee of the first trust is a restricted trustee if 26 either the trustee is a beneficiary of the first trust or if a beneficiary of the first trust has 27 a power to change the trustees within the meaning of § 55-2-17. 28 In addition, the following apply to all appointments made under this section: 29 (1) The second trust may only have as beneficiaries one or more of the beneficiaries 30 of the first trust: 31 (a) To or for whom a discretionary distribution of income or principal may be 32 made from the first trust; 33 26.464.15 26.464.16 3 100 Underscores indicate new language. Overstrikes indicate deleted language. SB100 ENROLLED (b) To or for whom a distribution of income or principal may be made in the 1 future from the first trust at a time or upon the happening of an event 2 specified under the first trust; or 3 (c) Both subsections (a) and (b); 4 (2) No A restricted trustee of the first trust may not exercise such authority over the 5 first trust to the extent that doing so could have the effect of: 6 (a) Benefiting the restricted trustee as a beneficiary of the first trust, unless 7 the exercise of such authority is limited by an ascertainable standard based 8 on or related to health, education, maintenance, or support; or 9 (b) Removing restrictions on discretionary distributions to a beneficiary 10 imposed by the governing instrument under which the first trust was 11 created, except that a provision in the second trust, which limits 12 distributions by an ascertainable standard based on or related to the health, 13 education, maintenance, or support of any such beneficiary, is permitted, 14 or to a trust established pursuant to 42 U.S.C. § 1396p(d)(4) (January 1, 15 2025); 16 (3) No A restricted trustee of the first trust may not exercise such authority over the 17 first trust to the extent that doing so would have the effect of increasing the 18 distributions that can be made from the second trust to the restricted trustees of 19 the first trust or to a beneficiary who may change the trustees of the first trust 20 within the meaning of § 55-2-17 compared to the distributions that can be made 21 to such the trustee or beneficiary, as the case may be, under the first trust, unless 22 the exercise of such authority is limited by an ascertainable standard based on or 23 related to health, education, maintenance, or support; 24 (4) The provisions of subdivisions (2) and (3) only apply to restrict the authority of a 25 trustee if either a trustee, or a beneficiary who may change the trustee, is a United 26 States citizen or domiciliary under the Internal Revenue Code, or the trust owns 27 property that would be subject to United States estate or gift taxes if owned directly 28 by such a the person; 29 (5) In the case of any trust contributions that have been treated as gifts qualifying for 30 the exclusion from gift tax described in 26 U.S.C. § 2503(b) of the Internal 31 Revenue Code of 1986 (January 1, 2026), by reason of the application of I.R.C. 26 32 U.S.C. § 2503(c) (January 1, 2026), the governing instrument for the second trust 33 must provide that the beneficiary's remainder interest shall vest vests no later than 34 26.464.15 4 100 Underscores indicate new language. Overstrikes indicate deleted language. the date upon which such the interest would have vested under the terms of the 1 governing instrument for the first trust; 2 26.464.16 4 100 SB100 ENROLLED (6) The exercise of such authority may not reduce any income interest of any income 3 beneficiary of any of the following trusts: 4 (a) A trust for which a marital deduction has been taken for federal tax purposes 5 under I.R.C. 26 U.S.C. § 2056 or § 2523 (January 1, 2026) or for state tax 6 purposes under any comparable provision of applicable state law; 7 (b) A charitable remainder trust under I.R.C. 26 U.S.C. § 664 (January 1, 8 2026); or 9 (c) A grantor retained annuity or unitrust trust under I.R.C. 26 U.S.C. § 2702 10 (January 1, 2026); 11 (7) The exercise of such authority does not apply to trust property subject to a 12 presently exercisable power of withdrawal held by a trust beneficiary to whom, or 13 for the benefit of whom, the trustee has authority to make distributions, unless 14 after the exercise of such authority, the beneficiary's power of withdrawal is 15 unchanged with respect to the trust property; 16 (8) The exercise of such authority is not prohibited by a spendthrift clause or by a 17 provision in the governing instrument that, instrument, which prohibits amendment or 18 revocation of the trust; 19 (9) Any appointment made by a trustee is considered a distribution by the trustee 20 pursuant to the trustee's distribution powers and authority; and 21 (10) If the trustee's distribution discretion is not subject to a standard, or if the trustee's 22 distribution discretion is subject to a standard that does not create a support 23 interest, then the court may review the trustee's determination or any related 24 appointment only pursuant to § 55-1-43. Any other court review of the trustee's 25 determination or any related appointment may be made only pursuant to § 55-1-26 42. 27 55-1-42. Notwithstanding the foregoing provisions of this section, the governing instrument 28 of the second trust may grant a power of appointment to one or more of the beneficiaries 29 of the second trust who are beneficiaries of the first trust. The power of appointment may 30 include the power to appoint trust property to the holder of the power of appointment, the 31 holder's creditors, the holder's estate, the creditors of the holder's estate, or any other 32 person, whether or not the person is a trust beneficiary. 33 A trustee’s power described in this section may be exercised by either an actual 34 distribution of property to one or more second trusts or by modifying the terms of the first 35 26.464.15 5 100 Underscores indicate new language. Overstrikes indicate deleted language. trust to create the second trust with or without an actual distribution. If the power is 1 exercised by modifying the terms of the first trust, the trustee may: 2 (1) Treat may treat the second trust created by such the modification as a new trust, in 3 which case property of the first trust would be transferred to the second trust; or 4 (2) Treat, trust, or treat the second trust as a continuation of the first trust with respect, 26.464.16 5 100 SB100 ENROLLED trust, for titling purposes, in which case property of the first trust would not need to be retitled. 6 In the case of an exercise of the power that is structured as a trustee's modification 7 of the first trust, however, notwithstanding § 55-2-18, the trustee shall provide not less 8 than at least twenty days days' advance written notice to the qualified beneficiaries, 9 applying chapter 55-18, unless the trustee receives written waivers of the notice from the 10 qualified beneficiaries. 11 The trustee's power, which is described in and constrained by this section, remains 12 separate and distinct from trust reformation or termination under §§ 55-3-24 to 55-3-26, 13 inclusive, or 55-3-28, and other provisions of law allowing trust modifications. 14 This section applies to any trust administered under the laws of this state, including 15 a trust whose for which the governing jurisdiction is transferred to this state. 16 Section 3. That a NEW SECTION be added to chapter 55-3: 17 Property given from a revocable trust during the trustor's lifetime to a trust 18 beneficiary other than the trustor, whether the beneficiary holds a vested or contingent 19 interest, is not treated as an advancement against the beneficiary's share, unless the 20 trustor declared in a writing, or the beneficiary acknowledged in writing, that the gift is an 21 advancement; or the trustor's writing or the beneficiary's written acknowledgment 22 otherwise indicates that the gift is to be considered when computing the division and 23 distribution of the trust estate following the death of the trustor. 24 A distribution from an irrevocable trust at the discretion of a trustee, or as directed 25 by a distribution trust advisor, is not treated as an advancement against the beneficiary's 26 share unless the trustee or distribution trust advisor declares in writing, or the beneficiary 27 acknowledged in writing, that the distribution is an advancement; or the governing 28 instrument indicates that discretionary distributions are equalized within or between 29 classes of beneficiaries and are considered when computing the division or distributions 30 from the trust. 31 Regardless of whether the recipient of the property survives the trust division or 32 distribution, the property treated as an advancement herein is considered in computing 33 the division and distribution of the trust estate, unless otherwise provided by the 34 26.464.15 6 100 Underscores indicate new language. Overstrikes indicate deleted language. governing instrument or in writing by the trustee, distribution trust advisor or beneficiary, 1 in accordance with this section. 2 For purposes of this section, property advanced is valued as of the time the 3 beneficiary came into possession or enjoyment of the property. 4 26.464.16 6 100 SB100 ENROLLED Section 4. That § 55-4-33 be AMENDED: 5 55-4-33. If a trustee violates any of the provisions of this chapter, he the trustee 6 may be removed and denied compensation in whole or in part;, part, and any beneficiary, 7 cotrustee, or successor trustee may treat the violation as a breach of trust. Until the 8 cessation of compensation is ordered by a court, a trustee is entitled to fees and expenses. 9 Section 5. That a NEW SECTION be added to chapter 55-4: 10 Unless expressly provided otherwise in a written agreement, the creation of an 11 attorney-client relationship between an attorney and a person serving as a fiduciary does 12 not impose upon the attorney any duties or obligations to other persons interested in the 13 estate, trust estate, or other fiduciary property, even though fiduciary moneys may be 14 used to compensate the attorney for legal services rendered to the fiduciary, or even if a 15 beneficiary is entitled to accountings or other information regarding the estate, trust 16 estate, or fiduciary property. 17 Section 6. That a NEW SECTION be added to chapter 55-4: 18 If an attorney-client relationship exists between an attorney and a fiduciary, 19 communications between the attorney and the fiduciary are subject to the attorney-client 20 privilege, unless waived by the fiduciary, even though fiduciary moneys may be used to 21 compensate the attorney for legal services rendered to the fiduciary, or even if a 22 beneficiary is entitled to accountings or other information regarding the estate, trust 23 estate, or fiduciary property. The existence of a fiduciary relationship between a fiduciary 24 and a beneficiary does not constitute or give rise to any waiver of the privilege for 25 communications between the attorney and the fiduciary. 26 Section 7. That § 55-16-10 be AMENDED: 27 55-16-10. A cause of action or claim for relief with respect to a fraudulent transfer 28 of a settlor's assets under § 55-16-9 is extinguished unless the action under § 55-16-9 is 29 brought by a creditor of the settlor who meets one of the following requirements: 30 26.464.15 7 100 Underscores indicate new language. Overstrikes indicate deleted language. who: (1) Is a creditor of the settlor before the settlor's assets are transferred to the trust, 1 and the action under § 55-16-9 is brought within the later of: 2 (a) Two years after the transfer is made; or 3 (b) Six months after the transfer is or reasonably could have been discovered 4 by the creditor if the creditor: 5 26.464.16 7 100 SB100 ENROLLED (i) Can demonstrate that the creditor asserted a specific claim against 6 the settlor before the transfer; or 7 (ii) Files another action, other than an action under § 55-16-9, against 8 the settlor that asserts a claim based on an act or omission of the 9 settlor that occurred before the transfer, and the action described in 10 this sub-subsection is filed within two years after the transfer; or 11 (2) Becomes a creditor subsequent to the transfer into trust, and the action under 12 § 55-16-9 is brought within two years after the transfer is made; 13 (3) . 14 made. In any action described in § 55-16-9, the burden to prove the matter by clear and 15 convincing evidence is upon the creditor; 16 (4) . 17 creditor. A person is deemed to have discovered a transfer at the time a public record of the 18 transfer is made, including the conveyance of an interest in real property that, property, which is 19 recorded in the appropriate public filing office where the property is located, the filing of 20 a financing statement pursuant to chapter 57A-9, or the filing of a bill of sale or other 21 transfer instrument regarding personal property; or 22 (5). 23 property. The filing of a bill of sale or other transfer instrument which that conveys personal 24 property to a trust which is governed by this chapter shall must be filed in the an applicable 25 public filing office determined as follows: 26 (a) . 27 office. If the transferor is a natural person and is a resident of this state, the personal 28 property transfer instrument shall must be recorded in the county in this state where the 29 transferor maintains the transferor's principal residence; and 30 (b) . 31 residence. In all other cases, the personal property transfer instrument shall must be recorded 32 in the county in this state where the trustee of the trust maintains a principal residence 33 or principal place of business. 34 26.464.15 8 100 Underscores indicate new language. Overstrikes indicate deleted language. This section and, section, §§ 55-16-9, and 55-16-11 to 55-16-13, inclusive, are inseparably 1 interwoven with substantive rights that, rights, and a deprivation of legal rights would result if 2 another jurisdiction's contrary laws and regulations to the contrary are applied to a claim 3 or cause of action described therein. 4 Section 8. That § 55-17-5 be AMENDED: 5 55-17-5. For purposes of the application of § 1014(b)(6) of the Internal Revenue 6 Code of 1986, 26 U.S.C. § 1014(b)(6), as of 1014(b)(6) (January 1, 2016 2026), a South Dakota 7 special spousal trust is considered a trust established under the community property laws 8 of South Dakota this state, as set forth in this chapter. 9 For purposes of this chapter, the term, "special spousal property," property" means 10 community property for those purposes. property. Community property as that is classified by a 11 jurisdiction other than South Dakota this state and 26.464.16 8 100 SB100 ENROLLED transferred to a South Dakota special 12 spousal trust retains its character as community property while in the trust. If the trust is 13 revoked and property is transferred on revocation of the trust, the community property 14 as that is classified by a jurisdiction other than South Dakota retains its character as 15 community property to the extent otherwise provided by South Dakota law the laws of 16 this state. 17 26.464.16 9 100 SB100 ENROLLED An Act to revise provisions related to trusts. I certify that the attached Act originated in the: Senate as Bill No. 100 Secretary of the Senate President of the Senate Attest: Secretary of the Senate Speaker of the House Attest: Chief Clerk of the House Senate Bill No. 100 File No. ____ Chapter No. ______ Received at this Executive Office this _____ day of _____________, 2026 at ____________M. By for the Governor The attached Act is hereby approved this ________ day of ______________, A.D., 2026 Governor STATE OF SOUTH DAKOTA, ss. Office of the Secretary of State Filed ____________, 2026 at _________ o'clock __M. Secretary of State By Asst. Secretary of State