Academic journal article South Dakota Law Review

A Dynamic Duo: South Dakota's Trust Laws & Business Entity Statutes

Academic journal article South Dakota Law Review

A Dynamic Duo: South Dakota's Trust Laws & Business Entity Statutes

Article excerpt

There are several reasons for the robust growth of South Dakota's trust industry. Not to be overlooked as a catalyst for that growth are South Dakota's much heralded business entity statutes. Pairing a South Dakota limited liability company or limited partnership with a South Dakota trust provides families with a dynamic duo that achieves a multitude of planning objectives. This article will survey South Dakota's entity choices and generally discuss opportunities to pair South Dakota entities and trusts.

I. INTRODUCTION

When a South Dakota trust is combined with a South Dakota limited liability company or limited partnership, a dynamic duo is unleashed. A dynamic duo is defined as "a powerful pair of people or things each with special abilities." (1) The most relatable dynamic duo screams back to childhood and Batman and Robin of DC comic's fame. As the years--and experiences--pile up, we become familiar with dynamic duos in music, movies, comics, food pairings, and wine pairings. Upon encountering a dynamic duo, the special abilities of each partner in the duo and what makes them great together are self-evident. To meet the needs of families who require powerful planning options to achieve their goals and objectives, their advisors seek a jurisdiction that satisfies client demands. South Dakota offers families and their advisors the dynamic duo of its trust laws and business entity statutes, each with their own special abilities. Other articles in this symposium edition will discuss the special attributes of South Dakota's trust laws. This article will survey South Dakota's limited liability company and limited partnership statutes and generally discuss planning opportunities to pair a South Dakota entity with a South Dakota trust.

The growth of South Dakota's trust industry is remarkable, but not accidental. As of July 2016, South Dakota possessed eighty-four state chartered, non-depository, trust services only private and public trust companies with a total of $226 billion in assets under management. (2) The steady growth of the trust industry began in 1997 when Governor Bill Janklow created the Governor's Task Force on Trust Administration Review and Reform ("TTF"). (3) This partnership between representatives from the trust industry and state government working together to enhance South Dakota's trust laws in a balanced and prudent fashion has proven effective. No other state has such a partnership.

The TTF confines its legislative recommendations to trust law. However, working closely with members of the TTF, the State Bar of South Dakota Business Law Committee tends to South Dakota's business laws to hone their special abilities as the other half of the dynamic duo. (4) In support of the effectiveness of South Dakota's dynamic duo, take note of the annual article published by Trusts & Estates Magazine, which compares and ranks the states that actively compete for clients to utilize the laws of their state to accomplish planning goals. (5) Since the inception of the annual rankings by the authors of Trusts & Estates Magazine, South Dakota has finished in the top tier every year. (6) In fact, in 2007, prior to grouping the states by tiers, South Dakota was ranked as the number one trust jurisdiction by Trusts & Estates Magazine. (7)

One key component to the rankings is the comparison of asset protection features of each state's limited liability company and limited partnership statutes. (8) Annually, South Dakota's entities have enjoyed the label of a "Best" jurisdiction for asset protection purposes. (9)

This article will discuss the South Dakota limited liability company ("LLC") and limited partnership ("LP") acts. The statutory provisions for South Dakota's LLCs are found at South Dakota Codified Laws ("S.D.C.L.") Chapter 47-34A. (10) The statutory provisions for South Dakota's LPs are found at S.D.C.L. Chapter 48-7. (11) Both entity choices feature a substantial asset protection shield, flexibility in structuring the governance of the entity to achieve centralization of management, and transfer restrictions to protect the assets owned by the entity from the risks posed by a member's or partner's creditors, predators, in-laws, and outlaws. …

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