Why Purpose Trusts Make South Dakota the Best Trust Jurisdiction

South Dakota continues to stand out as the top trust jurisdiction in the United States—and one powerful reason is its legal support for purpose trusts.

What Is a Purpose Trust?

In most traditional trusts, there must be a clear beneficiary—either a specific person or a class of people. But with a purpose trust, there doesn’t need to be a named beneficiary. Instead, the trust exists to fulfill a particular mission or goal.

You may already be familiar with early versions of purpose trusts, such as:

• Charitable trusts, created to support causes like education or poverty relief

• Pet trusts, set up to care for beloved animals after the owner’s passing

Now, purpose trusts are being used in even more creative ways—including to run businesses.

A Real-World Example: Patagonia’s Purpose Trust

A well-known example of a purpose trust came when the founder of Patagonia transferred ownership of his company into a trust. Why?

Because his children didn’t want to take over the family business—even though it had become wildly successful over several generations.

Rather than selling the company or handing it off to outside investors, he created a purpose trust. The mission? Keep the business running according to its founding values and continue supporting the employees and community.

Profits from Patagonia now stay within the trust, are reinvested into the business, and help support the workforce. There are no heirs profiting—just a trust built to preserve the original mission of the company.

The Role of the Trust Enforcer

Since there are no traditional beneficiaries, a trust enforcer is required to ensure the trust stays on course. This person—or a committee—acts like a board of directors and oversees the trust’s activity.

They make sure the trust operates exactly as it was intended, protecting the original purpose. The trust enforcer is part of what’s known as a directed trust structure, which gives added flexibility and oversight.

Why Choose South Dakota?

South Dakota is one of the few states where purpose trusts are clearly defined and fully supported by law. This means anyone who sets up a purpose trust there gets the benefit of:

• Privacy for the grantor and advisors

• Strong asset protection from creditors

• No state income tax on trust assets

• Flexible trust design and administration

• Long-term continuity, often for generations

South Dakota makes it easy to create a purpose trust that works—whether the goal is to run a business, preserve a legacy, or advance a mission-driven cause.

Who Should Consider a Purpose Trust?

A purpose trust is ideal for people who:

• Want their business to continue long-term, even if family doesn’t want to run it

• Value privacy, protection, and continuity

• Don’t need to pass on wealth to heirs but want to ensure their work or values live on

• Are looking for a structured way to give back to employees or a community

Conclusion: A New Kind of Legacy

Purpose trusts offer something unique—a way to preserve your life’s work without needing traditional heirs. With the right planning and oversight, they can continue a mission, run a business, or support a cause for generations to come.

Thanks to its forward-thinking laws, experienced trust professionals, and supportive legal structure, South Dakota remains the top place in the U.S. to set up a purpose trust.

Frequently Asked Questions (FAQs)

Q: What is the “purpose” in a purpose trust?
A: The purpose is the mission or objective the trust is meant to fulfill. This could include running a business, supporting a cause, or protecting a legacy—not serving specific beneficiaries.

Q: Can any state create a purpose trust?
A: No. Only a handful of states allow them, and South Dakota has the most advanced legal structure to support them long-term.

Q: What is a trust enforcer?
A: A trust enforcer ensures the trust is following its intended mission. Think of them as a board of directors overseeing the trust’s activities and making sure everything stays on track.

Q: Can a business be the “purpose” of a trust?
A: Yes! In fact, many purpose trusts are used to run businesses, especially when there are no family members who want to take over.

Q: Is a purpose trust revocable?
A: No. Purpose trusts are typically irrevocable, which helps preserve the mission and provide legal stability.

Q: Are there tax advantages to setting up a purpose trust in South Dakota?
A: Yes. South Dakota has no state income tax, offers privacy protections, and strong asset protection—making it one of the most tax-efficient jurisdictions.

Q: Is a purpose trust right for someone without heirs?
A: Absolutely. It’s a great option for individuals who want to preserve a legacy, support a business, or give back to their community even if they don’t plan to pass assets to family.