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The Office of the Comptroller of the Currency (the OCC) charters and regulates limited purpose national trust banks under federal law.
South Dakota remains the jurisdiction of choice for regulated Private Family Trust Companies (PFTCs). Traditionally, families have chosen as their trustees: family members, advisors and/or commercial trustees whom they have had personal, professional or business relationships with over the years.
Private Family Trust Companies (PFTC) can either be regulated or unregulated. The regulated trust companies generally receive a charter and the unregulated trust companies generally receive a license.
A settlor who wishes to establish a trust of longer duration under South Dakota law will need to appoint a South Dakota trustee and require that the trust be sitused and administered in South Dakota. There is no requirement that the settlor be resident or domiciled in South Dakota to take advantage of this law.
No State Income Tax The most significant tax advantage offered by South Dakota is that it does not collect income tax. This fact, combined with all the other trust laws, is what makes South Dakota such an attractive jurisdiction to establish trusts originating from other states.
The typical directed trust structure has an administrative trustee, i.e., South Dakota Trust Company (SDTC), and/or custodian (see Figure 1 above), with an outside investment advisor/manager of the client's choice being responsible for the trust's investment management.
The most significant tax advantage offered by South Dakota is that it does not collect income tax. This fact, combined with all the other trust laws, is what makes South Dakota such an attractive jurisdiction to establish trusts originating from other states.
This is because it has state-level regulations that allow trusts to continue in perpetuity, devoid of state income tax as well as capital gains taxes, and helped by court-sealed records. Compared to its competitors, South Dakota's key businesses are banking as well as health care.