Revise provisions related to trusts.
SB 69 revises South Dakota’s trust code to expand and clarify the roles of trust advisors, trust protectors, and excluded fiduciaries. The bill adds a new category of “tax trust advisor,” defines that role’s authority, and specifies that tax directions from that advisor can bind trustees and other fiduciaries when the governing instrument allows. It also updates definitions and liability rules so excluded fiduciaries are generally shielded from responsibility for actions taken at the direction of trust advisors, including investment, distribution, valuation, and tax-related decisions, subject to exceptions for gross negligence or willful misconduct.
The bill also modernizes South Dakota’s trust modification provisions. It expands the ability of a trustee to appoint assets from one trust into a second trust, including by modifying the first trust rather than making an outright distribution, and sets notice requirements for qualified beneficiaries. In addition, it broadens reliance protections for trustees and excluded fiduciaries receiving tax information from settlors, tax advisors, or managers of trust-owned entities, and it amends rules governing nonjudicial modification or termination of irrevocable trusts by requiring advance written notice to fiduciaries.
SB 69 amends multiple sections of chapter 55-1B and related trust statutes, changing how South Dakota trusts may be administered, delegated, and modified. It gives express statutory recognition to tax trust advisors, clarifies when trust advisors and trust protectors are fiduciaries, and limits the liability of excluded fiduciaries who follow advisor directions. It also updates the trustee power to decant or appoint assets into a second trust, adds procedural notice requirements, and strengthens the ability of trustees to rely on tax information without liability. These changes affect trustees, settlors, beneficiaries, trust advisors, trust protectors, custodians of custodial accounts, and attorneys or tax professionals involved in trust administration.
The bill appears to have been broadly supported and noncontroversial in the legislative process. It advanced through committee and floor votes with strong margins, including several unanimous or near-unanimous votes, and ultimately passed with only a small number of dissenting votes in the House. The lack of committee transcripts suggests there was little recorded public opposition or extended debate in the available materials.
The main policy issues likely concern the scope of authority given to non-trustee advisors and the extent to which trustees and excluded fiduciaries are insulated from liability when following those advisors’ instructions. The bill also raises questions about beneficiary protections, especially in the decanting and trust-modification provisions that allow assets to be moved into a second trust and permit modifications with notice rather than court approval. Any opposition would most likely come from those concerned about reduced fiduciary oversight, beneficiary notice, or the potential for tax and distribution powers to be concentrated in advisors rather than traditional trustees.