Land Trusts vs. South Dakota Directed Trusts: Why One Is Better

There’s a lot of talk on the internet about land trusts. They’re often promoted as a way to keep real estate transactions private. But while land trusts may offer privacy, they fall short in two major ways: control and asset protection. Fortunately, there’s a better solution under South Dakota trust law.

What Is a Land Trust?

A land trust is typically a revocable trust used to keep real estate ownership private. Instead of your name appearing on a property deed, the trustee’s name appears.

Here’s how it works:

• You set up a land trust and name a trustee (often someone you trust, or even an attorney).

• The trustee enters into the real estate transaction on behalf of the trust.

• After the transaction closes, you can later be named trustee and manage the property yourself.

On the surface, this seems like a good privacy tool. But there are serious drawbacks.

The Problems with Land Trusts

1. Loss of Control

With a land trust, you must rely on someone else to act as trustee during the transaction. That person may be honest and competent—or they may not. Once they hold legal authority, you’re essentially at their mercy. This opens the door for negligence or even abuse.

2. No Asset Protection

Many people wrongly assume that a trust automatically provides asset protection. But a land trust is revocable, which means creditors can still reach the assets. Unless you layer an LLC inside, there’s no shield against personal liability.

In short, a land trust gives you privacy but little else.

The Better Solution: South Dakota Directed Trusts

South Dakota offers a superior structure through self-settled irrevocable directed trusts. Here’s why they’re better:

• Control Without Risk: You still name an administrative trustee, but under South Dakota law, this trustee only handles administrative duties. They cannot act independently on transactions. Instead, you can serve as the investment trust advisor, retaining authority over buying, selling, and managing assets.

• Privacy: Your name stays off public records. Transactions are carried out under the trust’s name, with the trustee acting only at your direction.

• Asset Protection: Because the trust is irrevocable, personal creditors cannot reach the assets (as long as transfers comply with fraudulent conveyance laws).

• Flexibility: Even if you prefer a revocable trust for flexibility, South Dakota allows you to use the directed trust model. You’ll still have privacy and control, even if asset protection is limited.

This structure provides the best of all worlds—privacy, asset protection, and control.

Key Takeaway

Land trusts may sound appealing, but they come with significant weaknesses. South Dakota’s directed trust model solves those problems, offering privacy, strong asset protection, and full control through the role of investment trust advisor.

If protecting real estate ownership is the goal, a South Dakota directed trust is far more secure than a land trust in another state.

Frequently Asked Questions (FAQs)

Q: What is the main purpose of a land trust?
A land trust keeps your name off property deeds to provide privacy in real estate transactions.

Q: Do land trusts provide asset protection?
No. Land trusts are revocable and do not shield assets from personal creditors.

Q: How is a South Dakota directed trust different?
It allows you to retain control of investments as the investment trust advisor while an administrative trustee handles only administrative tasks. This structure provides both privacy and legal protection.

Q: Can I set up a South Dakota trust if I don’t live there?
Yes. Many people from around the country (and world) use South Dakota trusts because of the state’s superior laws.

Q: Should I still use a revocable trust?
It depends on your goals. A revocable trust with South Dakota’s directed trust structure offers privacy and flexibility, but not asset protection. For maximum protection, an irrevocable trust is the better option.