South Dakota Trusts: Decanting and the Power of Flexibility
In recent videos, I discussed the advantages of directed trusts and trust protectors in South Dakota—two key features that make the state the best trust jurisdiction in the United States. Today, I want to build on that discussion by introducing another reason South Dakota stands above the rest: decanting.
What Is Decanting?
Decanting is a modern trust law concept that allows you to move assets from one irrevocable trust to another irrevocable trust. Historically, irrevocable trusts were known for being rigid—once established, they were difficult to change. But decanting provides a way to adjust or modernize trust structures without court involvement.
This process can be used when:
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The original trust no longer fits the family’s needs
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There has been a change in tax laws
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A beneficiary’s circumstances have changed (e.g., substance abuse or financial instability)
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A better structure or updated trust language is needed
In essence, rather than amend the existing trust, you create a new trust and transfer the assets from the original one. This is often done through the trust protector, a role I discussed in a previous video.
The Role of the Trust Protector in Decanting
In South Dakota, the trust protector can be empowered to facilitate the decanting process. While not every trust protector is given this authority by default, South Dakota law allows you to grant that power in your trust document.
Once authorized, the trust protector can:
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Move assets from an outdated or inefficient trust
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Transfer those assets into a new trust that reflects current laws, family dynamics, or modern planning goals
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Help preserve the grantor’s intent while adapting to change
This ability is incredibly valuable when amending the original trust is not ideal, and creating a new trust is a more effective solution.
Why South Dakota’s Decanting Laws Are Superior
Every state that permits decanting has its own rules about when and how it can be done. But South Dakota has the most flexible and robust decanting statutes in the United States. In more scenarios than not, South Dakota law allows trustees or trust protectors to decant assets when it’s in the best interest of the beneficiaries or the trust’s purpose.
That doesn’t mean you can decant in every situation—you still need to follow the rules and ensure compliance—but South Dakota gives far more room to maneuver than other jurisdictions.
Real-World Example: Consolidating Outdated Trusts
I’ve worked with clients who have set up multiple irrevocable trusts over decades—often in their home state. Over time, they face a complex web of trusts (sometimes 6, 7, or even 9 separate trusts) that become a burden to maintain.
Why? Because:
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Administration becomes overwhelming
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Tax compliance gets expensive
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Distributions and reporting obligations pile up
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Crummey letters (related to gift tax exclusions) must be managed across each trust
Often, these families cannot consolidate those trusts under their current state’s laws. However, by redomiciling the trusts to South Dakota, they can then set up a new, streamlined trust and decant assets into it, simplifying their estate structure and ongoing responsibilities.
Final Thoughts: Flexibility Without Compromise
Decanting gives families and trustees the power to adapt irrevocable trusts to modern realities, without going through a court process or remaining tied to an outdated trust structure. While you must still approach decanting carefully and follow proper legal procedures, South Dakota’s decanting laws offer more flexibility than any other state.
This is yet another reason why, when it comes to trust planning—especially multigenerational or complex estate strategies—South Dakota is simply unmatched.