Hi, my name is Stuart Green. I’m the founding and managing attorney of Stuart Green Law, an estate, trust, and tax planning law firm focused on high-net-worth estate planning. If you like this video, please go ahead and like it on YouTube, as well as subscribe to our channel. We are constantly putting out new content, so if you want to stay up to date on modern trust and tax planning concepts, this is a great way to do it.
Recently, I put out a video discussing 10 reasons why South Dakota has the premier trust planning statutes in the United States, and is even considered one of the best in the world. That was an introductory video to those concepts, and today, I want to drill down on one of the items I talked about in that video: privacy. Privacy is increasingly important to clients, and there are a variety of reasons for that.
One of the elementary, more basic privacy planning strategies for all clients is using a revocable living trust for the purpose of avoiding probate. Just a quick reminder about probate: when you pass away, any assets that you have in your individual name have to go through the probate process, where a local court or judge oversees this process. Any information that you submit to the court—regarding the person who passed away, their assets, family members, contact information, and so on—becomes part of the public domain. Anyone can access that information.
To share a funny story, early in my career, I had a client call me and say that their father’s business partner had passed away. This business partner had owed the father money for many, many years, but the father, apparently a very generous man, kind of swept it under the rug, thinking the business partner didn’t really have the money to pay him back. The client asked if we could get our hands on this information, and I said, “Yeah, give me a few days.” Before I could call the client back, they called me and said they already got the information. It turned out that the father’s business partner, who had passed away, had $30 million worth of assets in his individual name. They found all this out through the probate process because that information is available to anyone.
So first and foremost, regardless of jurisdiction, you should be using a revocable living trust to avoid probate and keep your affairs private. Now, let’s go even a little deeper.
To the extent that a trust is subject to some type of suit, it isn’t necessarily protected from public disclosure. Not all states have privacy laws regarding trusts, but South Dakota does, and they take it very seriously. This is very important for wealthy families and families that may be subject to greater legal risk or exposure—certain types of professionals, business owners, celebrities, and so on.
In South Dakota, there is a total, complete, and forever seal on any information in a court proceeding related to a trust. No one will ever be able to access information regarding the provisions of the trust, the content of the trust, the assets of the trust, the beneficiaries, the settlor, the trustee—none of that information. Again, this is South Dakota trust statutes. Most states do not have any type of privacy laws in place. Delaware does, but it’s not a forever seal; I believe it only lasts three years. There’s a shelf life on that, which, I don’t particularly know why you would put a shelf life on it, but South Dakota doesn’t. So, again, it’s a very superior privacy statute when it comes to that.
One of the other really interesting things that South Dakota does, which no other state does to my knowledge, is that they offer quiet trusts. So what does that mean? In most states, when a beneficiary turns 18 years old, they have the right to the details of the trust that they benefit from. That information has to become available to them.
In South Dakota, it is up to the settlor—the person setting up the trust—how much or how little information is shared with the beneficiaries. This is something that can be updated over time. For example, if Mom and Dad set up a trust for the benefit of their kids and decide they want to share no information at all because they’re concerned that their son or daughter may rely too heavily on a trust that benefits them once Mom and Dad pass away, they can make that decision. They might put a plan in place so that if for some reason their kids do need money, there’s a team that can take care of them and make distributions on an as-needed basis. Maybe Mom and Dad decide before they pass away that they actually do want to share more information. They can update it. Or they might set up the team so that, after they pass away, the team has the discretion to decide whether to share more information with the beneficiaries.
There’s a ton of flexibility. But the bottom line is, when it comes to privacy, South Dakota is by far the best jurisdiction for this. And as I’ve mentioned in other videos, the beauty of South Dakota trust planning is that you don’t have to live in South Dakota to take advantage of their strong statutes. You can be a resident anywhere in the U.S. or even abroad. So it really pays to sit down and have a conversation about which jurisdiction makes the most sense for you and your family when it comes to your trust and wealth planning.
Thank you!