Awareness around the benefits of South Dakota trusts has been growing in recent years. Many now know about the asset protection, privacy and anonymity, and tax benefits a South Dakota trust can provide for high-net-worth individuals and families that other states cannot provide*.
However, as with selecting any other type of financial institutional to work with, there are many factors to consider when choosing a trust company to work with. Below are five key areas to think about as you begin to research what type of South Dakota trust company would best fit your needs.
1. Type of trust company
Trust companies come in all shapes and sizes, so it’s important to determine which type you’re after. Many trust companies or trust departments are associated with a traditional bank or other financial institution, but they can also be an independent entity. They can be public or private and range in size and scale. Public trust companies have either a state or national charter and often serve multiple and unrelated families. Generally, private trust companies are either an LLC or corporation set up specifically to provide trust services for only a few trusts or just one family.
Takeaway: If you have means and wealth to support a private trust company, you may prefer that option; however, most people will look to a public trust company.
2. Services offered
While all trust companies specialize in managing trusts, there are several intricacies within that service to consider. Some trust companies in the U.S. may only work with domestic trusts while others will handle both foreign and domestic. Trust companies may specialize in certain types of trusts, such as irrevocable trusts or irrevocable life insurance trusts. There also can be multiple levels or tiers of trust service depending on your needs. Asking about their service offerings and specialization areas can help you narrow down to the right choice.
Takeaway: If you have or think you may acquire foreign assets or may have foreign beneficiaries, you will want to work with a trust company that specializes in foreign trusts. On the other hand, if your trust will utilize U.S.-based investments and will only have U.S. citizen beneficiaries, then you should look to find a trust company that specializes in domestic trusts.
3. Fees
Trust companies charge fees in a few different ways so understand your options up front. Many will charge a fee based on a percentage of assets in the trust, while others will charge an annual flat fee. Either way, be sure to ask about their fees, both how they are charged and what is included and not included.
Takeaway: As with most other services, trust companies charge fees based on the level of service you desire. If a low fee is most important to you, expect to have minimal contact and limited trust account features. Conversely, if you need an ultra-responsive, proactive, and service-based trust company, then expect to pay a higher fee.
4. Type of relationship
Clients have different trust needs, so it’s good to understand what type of relationship you’d be entering with a prospective trust company. Are you looking for an organization that can provide creative solutions for you or are you looking for cookie-cutter options? Are you hoping to be in regular contact or only receive necessary communications? Do you have outside financial professionals such as a CPA you’d like your trust company to partner with? By speaking honestly about the type of relationship you’re looking for, you can see if their service models match your needs.
Takeaway: Most large public trust companies have large books of business, and their trust officers are less able to be hyper responsive to their clients – they also generally have multiple layers of red-tape related to distributions and investment decisions. On the flipside, smaller independent trust companies often are able to be much nimbler and more responsive to the requests of sophisticated clients.
5. History and reputation
Lastly, do your due diligence and learn more about the history and reputation of the trust company you are looking to work with. Have they been in operation for a significant amount of time? Are they well-respected in the trust community? These types of questions can give you peace of mind that you’re working with a stable organization you can trust.
Takeaway: Not all trust companies are created equal. While most can do things for their clients, not all offer the same level of care to ensure operational and legal compliance with federal and state laws. Some trust companies may just have one or two employees in South Dakota that act in a ministerial capacity, while others proudly complete all or the vast majority of their administration through many more employees stationed in South Dakota.
There are so many different options when it comes to trust companies, especially in South Dakota. Be sure to do your homework to find one that fits your needs and expectations.
South Dakota trust services are provided by BTC Trust Company of South Dakota, a wholly-owned subsidiary of Bankers Trust Company.
*Please Note: There are external links included in this article that will take you to a website Bankers Trust does not control. Bankers Trust has provided these links for your convenience but does not endorse and is not responsible for the content, links, privacy policy, or security policy of external websites.
Bankers Trust Company and its affiliates and their representatives do not provide tax or legal advice. You should consult with your tax and legal advisors regarding your unique situation and needs before deciding on an estate plan that would work best for you and your family.
