South Dakota, for the 3rd consecutive year in a row, is again ranked as being the top Dynasty Trust State in the nation while Delaware slips to the seventh position behind Ohio and Wyoming. A Dynasty Trust, not available in all states, is a powerful planning tool that essentially allows a trust to live in perpetuity (forever), therefore never subjecting the assets to federal estate taxations through a forced distribution. South Dakota was the first state in the nation to abolish the Rule Against Perpetuities in 1983, clearing the way for the creation of the Dynasty Trust.
The rankings chart, an annual ranking of dynasty trust states from across the country published by Nevada attorney Steve Oshins, is an excellent resource for advisors and clients because of the methodical and objective approach to evaluating the factors that impact the viability of dynasty trusts states such as whether they have an asset protection statute and how effective it is in comparison to other states. In addition, the chart considers state taxation on trusts and whether the state has directed trust and decanting statutes. The chart accentuates the vital importance of considering alternative trust jurisdictions in the wealth and trust planning process to ensure that clients are availing themselves of the most progressive trust laws in the country, particularly in the area of dynasty trust formation, which continues to be a very hot topic.
An important factor to consider relative to whether a dynasty trust state is the best for clients, not considered in Steve Oshins’ chart, is privacy. States have different privacy provisions protecting information contained in a trust from becoming public. Pennsylvania has no privacy provision and, after three (3) years, trust information can become public in Delaware. South Dakota is the only dynasty trust state that has a total seal on trust information forever. Clearly, this is also an important factor to consider when determining where to place a trust in the wealth planning process.
Steve Oshins’ chart can be viewed by clicking on the image below.