Trusts

Trusts

Trusts

What is a South Dakota Trust?

Today's trust are different. The S.D. trust provides flexibility, security, and privacy at any stage. From your first steps toward building wealth, a family or starting a business. Protecting your assets for the next generation. 

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Directed Trust Structure

Learn about the pros and cons of employing South Dakota directed trusts in your financial strategy.

South Dakota Trust

Video Series

Flexibility and Control

How a South Dakota Trust Can Give You More Flexibility and Control over the intent of the trust.

How to Distribute the money. Mandatory Vs. required distributions of income.

Advantages of a South Dakota Trust Structure: Distribution Administrative Trustee Investment Committee.

Learn about the “use it or lose it” situation for estate lifetime transfers.

Passing your family business to the next generation.

Questions to ask when setting up the trust: Is the asset liquid or illiquid? Is it able to be sold or do other shareholders have rights of first refusal? Can an asset be sold without other shareholders approving it? What does an investment committee need to consider when investing for a trust? What does an investment committee need to consider when investing for a trust?

Protect Your Legacy

What are your responsibilities as a trustee?

Questions you need to ask when setting up the trust:

What is the duration of the trust How long is the trust expected to last?

What is the value of trust Assets? How is it being valued? Who will be the beneficiaries of the trust?

Potential Change in Circumstances Such As: Divorce Death Marriages Grandchildren The best way to ensure the trust is used the way you intend is to put it in writing. Is your intent clear?

What is a Spendthrift Trust? The best practice is to set distribution standards. This leads to the benefits of a South Dakota Trustee infrastructure which allows for a distribution committee.

Thank you for watching. I’m Ann Zuraw and I’m here when you want to discuss trust.

The Basics of a Trust

Who’s Whom in a Trust?

The beneficiary of a trust. A Grantor or Settlor. What is Grantor’s Role?

The Importance of Trust Wording.

Setting Up a Spend-Thrift Trust. The South Dakota Trust Infrastructure using a Distribution Committee is an advantage in interpreting the intent of a trust.

Benefits

Benefits of a
South Dakota Trust

South Dakota’s emerging and dynamic trust laws distinguish it as the superior U.S. trust jurisdiction. South Dakota has consistently been ranked as the top U.S. Dynasty Trust state, and its decanting statute has been ranked as the most progressive in the nation. In addition, South Dakota has the strongest privacy provisions and one of the most powerful domestic asset protection statutes in the nation, as recently observed by Trust & Estates Magazine. Consistently recognized as an innovator in the trust industry, South Dakota is also one of only three states with a Community Property Trust statute, a very powerful tax planning tool, and the only state in the nation with the Family Advisor role, referred to as a “trust protector light.” Click here to view a chart comparing the leading U.S. trust jurisdictions, with a particular emphasis on these areas that clearly distinguish South Dakota as the superior U.S. trust jurisdiction.

South Dakota Trust

Not your Grandmother's trust

What will a South Dakota Trust do for you?

AZ: Hi. Welcome. I’m Ann Zuraw from Zuraw Financial Advisors out of Greensboro, North Carolina, and today we’re going to talk about why a trust today is no longer your grandmother’s trust.

AZ: David, I’m going to ask you this question. What has changed from having a trust? I’ve actually always been kind of against trusts because it meant that you didn’t trust the person that was the beneficiary. But, today’s trust, it’s really different. Can you just talk about, as a lawyer from a legal perspective, and why South Dakota…

DW: I love this question because the trust industry is going through, really, almost like a revolution in terms of the kind of control now that can be exerted around these trusts. And, it’s actually even changed the whole idea of whether a trust is really irrevocable anymore. And the foundation of these new trusts and these modern trust laws is the concept of the directed trust which really bifurcates legal duties and separates what has traditionally been bundled together at the large trust companies which, as you know, they have been under a lot of scrutiny and criticism lately because of their high fees and because of conflicts of interest that are very clear 

AZ: One of the benefits that I realized, too, if you have a family business, and there are a lot of family business owners out there, a lot of women business owners. And you want to keep control and have it stay in your family, yet you do want to pass it along to the next generation, and so from a planning perspective, having a trust can actually do both.

DW: Certainly. Inside of these directed trusts, they create various roles, really for fiduciary positions. And there’s the ability, frankly, to create three of them. The distribution committee, an investment committee, and then a trust protector, which is part of this overall structure.

AZ: I think what I like, it’s not your grandmother’s trust, because the trustees of yesteryear, we’ll say, or the past, had complete control. You know, we’re all fiduciaries. So, that means that we have the best interest of the beneficiary, as trustees, but it was just one person. There was a bank, and they did the investments. They might be the trustee, and then they decided the distributions. I’ve seen women, actually, in their 70’s, and they’re the beneficiary of a trust. And, they’re really trying to get money to be able to live in a retirement home, and the trust is saying, “No.” And, so, having that control is really important, and who are they looking out for? And, so, by separating the duties and, correct me if I’m wrong, maybe you can explain further that you could have a different investment person, different people on the distribution committee, you have Bridgeford Trust as the administrator, and it actually keeps everybody holding themselves with accountability.

DW:Absolutely. And I think that’s the best part about it. It keeps us all separate. It keeps us all independent of each other. But, it allows you and I to be collaborators, so on its first blotch, you would wonder why a trust company and an investment management company are sitting together talking about these concepts. But, it’s because we partner together, and we can partner together. And that collaboration has replaced competition. And somehow we’re collaborators instead of competitors, and the people who win are the clients because the fees are lower and they have much more control. And the conflicts of interest go away.

AZ: And you can amend it as your life changes if you need to. It’s not permanently irrevocable. So, appreciate you guys listening today. Or, “Y’all.” And, if you have any questions, don’t hesitate to call myself, Ann Zuraw, at Zuraw Financial Advisors, or…

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Why a Prenuptial Agreement Does Not Protext Your Assets

AZ: Hello. Welcome. I’m Ann Zuraw. I’m President of Zuraw Financial Advisors, a registered investment advisor with SEC in Greensboro, North Carolina. And, we’re here today to talk about why you as a woman should consider a trust in South Dakota. And, we have David Warren of Bridgeford Trust here. David, you want to introduce yourself?

DW: Absolutely. It’s great to be here with you, Ann. I am David Warren, Co-founder of Bridgeford Trust Company which is an independent trust company with trust powers in South Dakota. I’m very excited about this topic and looking to collaborate with you on how to best serve women within the trust space and beyond.

AZ: I thought I’d start today with a fun fact about South Dakota. I lived there for a while, so I actually visited Laura Ingalls Wilder’s home, which is in De Smet, South Dakota. I hope I’m pronouncing that correctly. But, I just thought I’d mention her as, early on, late 1800’s, as a woman with assets, Laura probably needed a trust out of South Dakota. But it was a little early then. So, in one of the topics that I see, again, I work a lot with women and women, whether they’re 20 or 30 or 40 or 70. And a woman with assets, how do you keep control over your assets and have them for your benefit yet not have them not within your control? And, so, one of the usual ways was to have a prenuptial agreement. But, it’s not so good when you’re about to get married and somebody says, “Would you mind signing this agreement, Honey?” So, what’s your thoughts on that, David?

DW: I love this topic. It’s something that we’ve spent a lot of time looking at over the years. The idea of control is really what makes South Dakota so special and powerful, and I think, particularly in this space for women the control aspect of what now you can do that you couldn’t have done 15 or 20 years ago, makes your question particularly sort of compelling and relevant. The idea of an asset protection trust, a domestic asset protection trust as we talked a lot about in the media for years, is still a relatively new animal, so to speak, here in the United States. And before the ability to have a domestic asset protection trust, the only real way a woman would welcome control and protect her assets before marriage and after marriage, more importantly, or if there were a subsequent divorce, was through a prenuptial agreement. Which, as you know, in some states, are not easy to enforce. There’s a lot of rigor around making sure that formalities are upheld and, more importantly, there’s a disclosure requirement to the spouse, which is often, to the point you were making earlier, it’s a hard conversation to have with somebody you’re supposed to be in love with, “Hey, everything’s great but, oh, by the way, please sign this piece of paper.” The domestic asset protection trust, it’s really only available in a couple states, South Dakota being one of them. Nevada and Alaska and a few others have the same capability. But, South Dakota is considered one of the strongest and most powerful primarily because of its two-year look-back period. But, how it works in the context of a prenuptial agreement is that we have the ability to create a domestic asset protection trust. The woman of wealth can do that as a self-settled trust, still retain a tremendous amount of control over the trust through using the directive trust structure, but still be able to receive distributions. All the income from the trust can be distributed to her as well as the principal, which is controlled by distributions through a distribution plan. The point is, that trust can be created in a way, without ever having to have a conversation with the intended spouse. In fact, there is no timing requirement as long as it’s signed and funded before marriage, even the day before. That’s not going to be an issue. And it’s nothing that it could ever even be discoverable, which means that it’s not even something that has to be revealed, the existence of it, prior to marriage. So, it’s a very powerful tool.

AZ: Well, we just thought we’d talk briefly today, so we appreciate you guys joining us. Thank you. Or, “Y’all,” I should say. I’m from the South. And, just to really focus on women with assets. And, again, how you define assets is another subject for another day. But, again, don’t hesitate to call me. I’m Ann Zuraw, azuraw@zurawfinancialadvisors.com, or, David…

DW: Don’t be afraid to give us a call. You’ll see at the end all of our contact information. But, we’d love to work with you in any capacity we can help.

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How to Decide Who to Trust with Your Trust

Ann Zuraw of Zuraw Financial Advisors and David Warren of Bridgeford Trust talk about the advantages of a trust situs in South Dakota. David Warren discusses the role of a Trust Protector also known as a “Super Trustee”. Ann and David discuss the various opportunities for fiduciary roles in the management of the trust. South Dakota is the only jurisdiction currently offering the ability to appoint a Family Advisor Role. The Family Advisor role offers the ability to choose your investment manager or keep a family lawyer involved. 

DW: One of the most amazing things about South Dakota law at this point is the control that it gives back to clients. We talk about it in terms of how important that is to women, as well. There is a particular nuance in South Dakota that delivers great control in conjunction with the directed trust statute called “Trust Protector.” And we refer to the Trust Protector as a super trustee because, under South Dakota law, the Trust Protector really has more power, quite frankly, than the trust company itself, and the trustee itself, which we believe, at Bridgeford, is a very good thing for you, and a very good thing for your clients because it places much more control, as I said earlier, back into the hands of clients. And, often, I would suspect you’ve been asked to be a Trust Protector over the years. And how do you respond to that?

AZ: When I was part of a Broker-Dealer and we’re able to be a trustee for a family-related trust,  there’s definitely a fiduciary liability. What the role of trustee is very important. I think, “No.” Most financial advisors will say, “No,” to being trustees.

DW: And that makes sense because the trustee and the Trust Protector are both fiduciary roles, which means that you have a heightened duty to always do the right thing. And I know you always would do the right thing.

AZ:  I am a fiduciary as an RA. However, the trustee is a whole other level of legal interpretation.

DW: Absolutely. And, so, lots of compliance groups don’t want their people to do that. And, so, what South Dakota did, and frankly it’s the only state right now in the country that had the foresight to create this provision, or role really, it’s called a “Family Advisor.” And, the Family Advisor is so powerful because it’s very much like a Trust Protector in that it gives a lot more control outside the trust. It can control aspects of the trust, but it’s a non-fiduciary position. So, South Dakota created this position in direct response to the challenges you had. So, you get very close to your clients. I know your clients love you and they want you to be part of their world for a long, long time in that capacity, but your regulators aren’t happy to have you be in the fiduciary role. So, South Dakota created this non-fiduciary role, and we refer to it a lot as a “Trust Protector to Life.” So, you have a lot of the same powers but just without the fiduciary liability.

AZ:  I think that’s key. It’s fiduciary liability versus fiduciary responsibility because, just as a registered investment advisor, I am a fiduciary, and we can define fiduciary from a legal perspective, but it means we do what’s in your best interest. And, I think this is a good example that getting other people involved, whether it’s a Family Advisor, or it could be a lawyer the family has used forever, whatever state you’re out of. Or, it could be somebody who is involved with a company, a family company. I mean, there are a lot of different roles that that Family Advisor could be, and be a part of that asset, the family, which I would like to think is a family asset.

DW:  Absolutely. And it’s important to know that at this point, as I said earlier, only South Dakota has this capability. So, when we talk about the importance of selecting the proper trust jurisdiction, if a family’s really worried about control, and that’s what’s driving their planning, and that’s what they need is the ability to control these trusts, and South Dakota really is where they want to be looking at this point.

AZ: Thank you all for joining, and we just want to reiterate, “It’s no longer your grandmother’s trust. It’s a changed trust environment.” And, if you have any questions, don’t hesitate to call me.

AZ:
Thank you. 

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How to Keep Your Assets Confidential

The advantages of a trust situs in South Dakota.

AZ:  I deal a lot with women and women with assets. And one of the issues that comes up is, do you disclose those assets to your spouse and how involved do they get, the spouse gets involved with those assets. I deal with a lot of women, unfortunately, going through a divorce. And they regrettably wish there had been a trust to keep those assets separate because they’re no longer.  What are the privacy laws? Why are they different in  South Dakota compared to some of the other states that do trusts?

DW: South Dakota, over the last 10 or 15 years, has been universally recognized as having the most powerful privacy provisions in the country. And, in fact, even recently, they’ve been acknowledged around the world as having the most powerful privacy provisions. And it’s really made up of two aspects. The first one is the idea of a quiet trust. And a quiet trust is something as simple as just making sure that if a family, or you as a settler of a trust, don’t want your children to find out about the trust after they turn the age of 18, you have the right to do so. So, in most states, Pennsylvania, New Jersey, even Delaware, and some of the other trust-progressive trust jurisdictions, there’s a requirement at age 18 for them to start to receive statements. And that is upsetting for families of wealth because often they don’t want a child who is in college as a freshman somewhere to find out that they’re the beneficiary of a large trust because why would they bother going to class if they knew they had access to that kind of money?

AZ: Well, the other privacy, I think, that this has really become an issue, is the internet. So, your grandmother’s trust 90 years ago didn’t have the internet. It wasn’t going to be public knowledge. And, nowadays, if you’re interested and want to figure out if somebody has a trust, all you got to do is Google it, and it’s right there at your fingertips. So, that whole issue is becoming more and more important. And, again, I’m a financial advisor, and everyone has different views as to how they want to treat their assets or treat their wealth and whether they want their kids to know about it. And I respect that and, so, at least if you’re uncomfortable with an 18-year-old knowing the extent which, I’m a full disclosure person, but that’s their right, but they don’t really have an option. So, South Dakota actually helps deal with that issue.

DW: The issue of the internet is sort of the second piece of the privacy provisions. In most states, if a trust is involved in some sort of litigation and it becomes a matter of public record because it’s entered into a docket system, and now you have the internet, and somebody can get to the public docket system and click on the evidence or the information on that case, and all of the information can become part of the public record, meaning, the beneficiaries, how much is in the trust, who’s managing the money, which is not information people want in the public domain. So, South Dakota’s law is very specific, and as a matter of law, all trusts in South Dakota are sealed, which means that you don’t have to go to a judge to ask he or she to seal the trust, which is very important because in most states… Well, first of all, most states don’t have any privacy provisions. The other state that has something similar to South Dakota is Delaware, but that seal isn’t automatic. You have to ask a judge. More often, the judge will say, “No.” And, more importantly, even if you get a seal in Delaware, it’s only for three years, whereas, South Dakota, it’s forever.

AZ: I think, again, just to reiterate, it doesn’t mean you don’t tell the beneficiaries there’s a trust. It’s just, you want to have it on your own terms, and you want to keep that control. So, that’s where having the different committee structure, which we talked about previously in another video, really allowed you to get children or soon-to-be young adults involved with the management of the trust. So, I want to thank you all for joining us. I’m Ann Zuraw. 

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Tax Benefits of Using a South Dakota Trust

AZ:  One of the issues that come up, because I deal with clients all over the country even though I’m out of North Carolina, whether it’s California or New York, is taxes.

DW: Certainly. The idea of situs is nothing more than just jurisdiction, just legal jurisdiction. And, as most people know, each state has its own laws relative to trust laws. South Dakota Trust themselves, are not taxed. So, to your specific question, that makes the issue of trust jurisdiction or trust situs so compelling because this is one of the most measurable areas we have to see what happens if you don’t choose the right jurisdiction. In this case, what we’re talking about is something called a “Resident Trust.” So, it’s a properly established trust in a jurisdiction like South Dakota that does not have state taxation.

AZ:  Can you do this if you don’t live in South Dakota? Because, I have a lot of people like, “How on earth could I have a South Dakota trust if I don’t live in South Dakota? I live in North Carolina.”

DW:  Absolutely. That’s an excellent question. You can establish a trust anywhere you like, even out of the country if you want to. The key is,  it becomes the trust company’s responsibility to make sure that it really is, first of all, a valid trust and properly administered in South Dakota to make sure that the laws of South Dakota apply. And, that’s the magic. You have to make sure the laws of South Dakota apply. So, anybody can settle a trust, set up a trust in South Dakota, and can be the beneficiary of a trust in South Dakota. The key is, though, that it’s a South Dakota trust which means then that South Dakota’s laws apply, and since there’s no income tax, we avoid taxation on undistributed income. So, if you think of a large trust that’s in place for multiple generations, often there isn’t a lot coming out of those trusts. So, residents of California have a lot to save here. Residents of North Carolina have a lot to save. The reason why I specifically mention North Carolina, your home state, is because it is one of the leading jurisdictions right now to acknowledge this principle that if a trust is properly established in a jurisdiction that does not have income tax, then it becomes unconstitutional for the state of North Carolina to try to tax the undistributed income because, why, it’s not subject to the laws of North Carolina. And there’s a great appellate court case right on point within the last 18 months that has acknowledged just that. There’s also a case out of Pennsylvania and New Jersey, and it’s an excellent case and it lays the groundwork for excellent planning. I know, Ann, you do a lot of planning for your clients. A lot of it is payroll taxation, but how much are you seeing now state taxation planning coming to the forefront?

AZ:  I think we really want to make it clear that we are all in favor of paying taxes. If you made income, you owe taxes. So, that’s really the basic. But, if you live in New York City, and you’re being taxed on the income that you work there, but yet there’s a trust that you’re the beneficiary of but you may not be getting even paid out any money, why should you be paying your city, state taxes? So, it’s really just, I think, protecting what you have and having it grow, not trying to shelter or hide anything.

DW: This is not tax evasion at all. This is tax planning, smart tax planning, that takes advantage of laws that are already on the books. Nobody is suggesting that anybody hides money from the government or shirks their responsibility to pay taxes. But, a smart planner needs to understand the options. And just because somebody exercises their option to take advantage of this opportunity doesn’t make them bad. It just makes them smart planners.

AZ:  The other thing that I think is so exciting about these trusts is that you would have a distribution committee, and if the person moved to a different state, or if they need the income and they want to pay taxes to whatever state they’re living, they can do that. It’s not permanent. It’s flexible. It’s amendable. And, so, as people’s lives change… I mean, I really didn’t think I’d be living back in North Carolina. I lived in New Orleans, New York, California. I even lived in South Dakota. So, you don’t really know where you’re going to end up and really don’t want to have the taxes be part of your decision.

So, thank you, Guys, for joining us. Or, “Y’all.” And, I’m Ann Zuraw with Zuraw Financial Advisors, and…

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Risk of a Prenuptial and Advantages of a Trust

AZ: Hello. Welcome. I’m Ann Zuraw, President of Zuraw Financial Advisors, a registered investment advisor with SEC in Greensboro, North Carolina. And we’re here today to talk about why you as a woman should consider a trust in South Dakota. We have David Warren of Bridgeford Trust here. David, you want to introduce yourself?

DW: Absolutely. It’s great to be here with you, Ann. I am David Warren, Co-founder of Bridgeford Trust Company which is an independent trust company with trust powers in South Dakota. We’ve been active in working in that space for over five years now, recently celebrating our five-year anniversary we’re very excited about, with two offices in South Dakota, locations in Pennsylvania and also planned locations in New York City, Miami, and southern California.

AZ: I’ve been so excited to really understand how this potential would work because I see women in their 70’s wanting to get remarried, and they’ve got a family already, and they have assets, and the answer is, “Oh, just do a prenuptial.” But, in this day and age, if you marry someone who has Alzheimer’s, that prenuptial agreement is not going to protect you. And, so, Alzheimer’s, $10,000 a month. That’s in North Carolina. It’s a lot more in California. A hundred and twenty thousand a year, 20 years. I mean, that could use up a lot of those assets which were either for the woman’s benefit or for her kids. And it didn’t matter if it’s in a prenuptial agreement. That’s an example that I think would work. The other one is just from a liability perspective. Maybe you see it in different cases with different careers. I think you mentioned earlier, a construction company, or if you…

DW: Absolutely. I mean, the idea of a domestic asset protection trust, and we’re talking about in the context of how a woman of wealth can use it to protect themselves but, generally speaking, the idea of this asset protection is something that you can only get if you went off shore to jurisdictions like the Cook’s Island and the Bahamas. For a myriad of reasons, those off shore solutions are considered to be less fashionable and less practical. So, about 15, 20, years ago, Delaware and South Dakota were both the first to create basically the same thing in the United States with respect to the type of asset protection that we’re talking about. So, really, anybody with any kind of risk, and you don’t even have to have an articulated risk, but if you’re concerned about someday being sued, just like you would have insurance, people don’t necessarily have to know you’re going to be sued or you’re going to need an insurance policy, but feel better often to put these domestic asset protection trusts in place. And, they can do it to hold real estate. They can do it to hold stock. It’s not just for investable assets, which is a really important planning point. And, as I said earlier, which is so unusual, and especially when you juxtapose them with an off-shore solution, is that you have so much more control over how these assets are managed. So, in this example, under the directed trust structure, which is something we would create as part of a domestic asset protection trust for a client, your firm can be named as the asset manager. At Bridgeford Trust, we don’t manage money. We do not want to manage money. It just gives infinitely more control to your clients and to you as an advisor. You, as the closest family advisor, can be very much involved with that document and with the execution of the trust. So, not only is there the protection, but you don’t lose the control, and it gives you and your clients, and you particularly, the ability to do a lot more for them in an overall planning capacity than, frankly, a lot of your competitors.

AZ: Well, we just thought we’d talk briefly today. So, we appreciate you guys joining us. Thank you. Or, “Y’all,” I should say. I’m from the south. And just to really focusing on women with assets and, again, how you define assets is another subject for another day. But, again, don’t hesitate to call myself. I’m Ann Zuraw. azuraw@zurawfinancialadvisors.com. Or, David…

DW: Don’t be afraid to give us a call. You’ll see at the end all of our contact information. But, we’d love to work with you in any capacity we can help.

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