South Dakota Trusts: Taking Flexibility Further with Trust Protectors
In this ongoing video series highlighting why South Dakota is the top trust jurisdiction in the United States, we’ve covered several unique features—including directed trusts. Today, we’re going one level deeper by exploring a powerful but often overlooked role in trust planning: the trust protector.
Why Trust Protectors Matter in Irrevocable Trusts
You’ll typically encounter a trust protector in the context of an irrevocable trust. Historically, irrevocable trusts were seen as rigid and inflexible—once set up, they couldn’t be easily modified. However, the trust protector role was developed to introduce flexibility into this structure, giving the trust adaptability without compromising legal integrity.
As the grantor (person setting up the trust), you can’t reserve powers to amend or modify an irrevocable trust yourself. But by appointing a trust protector, you create a legal pathway for the trust to be changed or updated when necessary—without court involvement.
Powers of the Trust Protector
In a South Dakota irrevocable trust, a trust protector can:
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Amend or correct errors in the trust document
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Adapt the trust in response to changes in tax law, family circumstances, or asset levels
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Fire and replace the trustee
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Add or remove beneficiaries
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Reject accountings or reports from the trustee
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Move the trust to a different jurisdiction, if needed
These powers allow the trust protector to keep the trust aligned with the original intent of the grantor, even as life changes. This ensures that the trust can continue to serve its purpose for decades or generations.
Why South Dakota Excels in Trust Protector Law
While some states allow for trust protectors, many do not have specific statutes or case law defining their powers and responsibilities. In fact, a few states—perhaps four or five—don’t even have trust protector laws on the books at all. Others have simply adopted template language from the Uniform Trust Code or other model acts, without adapting those laws to fit their existing trust frameworks.
South Dakota, on the other hand, has taken a highly intentional and thoughtful approach. Its laws clearly define:
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The scope of authority for the trust protector
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The limits of liability, ensuring they are not held accountable for actions of other fiduciaries (like the administrative trustee, investment advisor, or distribution advisor)
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Their oversight role, acting as a kind of “watchdog” to ensure the grantor’s intent is honored over time
This legal clarity is essential. Without it, fiduciaries could be exposed to unintended liability—or worse, fail to act for fear of legal consequences.
The Trust Protector’s Role in Family Governance
Beyond flexibility, the trust protector also plays a key role in family governance. They serve as the long-term steward of the grantor’s wishes, helping to:
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Protect the trust from poor decision-making by future generations
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Modify terms in response to personal issues, such as a beneficiary developing a substance abuse problem
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Step in when existing fiduciaries aren’t fulfilling their duties
They may be granted authority when the trust is first drafted, or may be appointed later by a committee, a court, or even beneficiaries through a formal process—all of which are supported by South Dakota law.
Why Most States Fall Short
In many jurisdictions, attorneys don’t include trust protectors in planning because their state lacks strong legal protections or statutory guidance. In contrast, in South Dakota, it’s rare to see a well-drafted irrevocable trust that doesn’t involve a trust protector. The state not only encourages their use—it structures trust law around the expectation that this role will exist and be relied upon.
Conclusion: Flexibility Starts with a Trust Protector
If your goal is to maximize flexibility in an irrevocable trust—especially over multiple generations—you need to work within a jurisdiction that clearly defines and supports the trust protector role.
South Dakota is that jurisdiction.
Its robust and well-written trust protector laws are unmatched in their clarity, depth, and practical application. Whether you’re looking to ensure long-term family governance, adaptability to changing laws, or protection from fiduciary missteps, appointing a trust protector in South Dakota is one of the smartest moves you can make in trust planning.