ENTITLED, An Act to revise various trust provisions.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
Section 1. That § 51A-6A-19.2 be amended to read as follows:
51A-6A-19.2. Any trust company authorized by this title, shall, before transacting any such
business pledge to the division and maintain at all times investments for the security of the trust
creditors of the trust company including as a priority claim costs incurred by the division in a
receivership or liquidation of the trust company in the event it should fail. The amount of the pledge
shall be determined by the director in an amount deemed appropriate to defray such costs, but may
not be less than a market value of one hundred thousand dollars, and may not exceed five hundred
thousand dollars for a private trust company or one million dollars for a public trust company. All
investments pledged to the division shall be held at a depository institution in this state and all costs
associated with pledging and holding such investments are the responsibility of the trust company.
The investments pledged to the division shall be of the same nature and quality as those required
for public funds as provided in§§ 4-5-6 and 4-5-6.1.
The commission may promulgate rules pursuant to chapter 1-26 to establish additional
investment guidelines or investment options for purposes of the pledge required by this section.
In the event of a receivership of a trust company, the director may, without regard to priorities,
preferences, or adverse claims, reduce the pledged investments to cash and, as soon as practicable,
utilize the cash to defray the costs associated with the receivership.
Income from such investments shall belong to and be paid to the trust company as long as it
continues to conduct its business in the ordinary course and so long as authorized by the director.
The proposed effective date of an order requiring an existing trust company to increase its pledge
shall be stated in the order as on or after the thirty-first day after the date of the proposed order.
Unless the trust company requests a hearing before the commission in writing before the effective
date of the proposed order, the order becomes effective and is final. Any hearing before the
commission shall be held pursuant to chapter 1-26.
Section 2. That § 51A-6A-11.1 be amended to read as follows:
51A-6A-11.1. A public trust company shall:
(1) Maintain office space in South Dakota for trust company business and for the storage of,
and access to, trust company records required by § 51A-6A-30;
(2) Hold no less than two governing board meetings with a quorum physically present in
South Dakota annually;
(3) Employ, engage, or contract with at least one trust officer or key employee to provide
services for the trust company in South Dakota related to the powers of the company in
§ 51A-6A-29 and to facilitate the examinations required by § 51A-6A-31; and
(4) Perform trust administration in South Dakota.
Each public trust company chartered in South Dakota prior to July 1, 2012, shall meet the
requirements of this section no later than July 1, 2015, unless the director grants an extension of up
to twenty-four months upon a showing of good faith effort. A public trust company seeking an
extension of time shall include in its application to the director the reasons for any delay and a
detailed time line for expected compliance with this section.
The commission may promulgate rules pursuant to chapter 1-26 to establish additional guidelines
regarding what constitutes trust administration in South Dakota for purposes of this section.
Section 3. That § 51A-6A-39 be amended to read as follows:
51A-6A-39. All information the director generates in making an investigation or examination
of a state trust company is confidential. All confidential information shall remain the property of the
division and shall be furnished to the trust company for its confidential use. Under no circumstances
may a trust company disclose a report or any supporting documentation to anyone, other than
directors and officers of the trust company or anyone acting in a fiduciary capacity for the trust
company, without written permission from the director.
The director shall give ten days' prior written notice of intent to disclose confidential information
to the affected trust company. Any trust company which receives a notice may object to the
disclosure of the confidential information and shall be afforded the right to a hearing in accordance
with the provisions of chapter 1-26. If a trust company requests a hearing, the director may not reveal
confidential information prior to the conclusion of the hearing and a ruling. Disclosure of
confidential information shall be made only to formal regulatory bodies which clearly have a need
for the confidential information. Prior to dissemination of any confidential information, the director
shall require a written agreement not to reveal the confidential information by the party receiving the
confidential information. In no event may the director disclose confidential information to the
general public, any competitor, or any potential competitor of a trust company.
The submission of any information to the division in the course of any investigation or
examination may not be construed as waiving, destroying, or otherwise affecting any privilege any
person may claim with respect to the information under South Dakota law or federal law.
Section 4. That § 55-2-15 be amended to read as follows:
55-2-15. Unless the terms of the governing instrument expressly provide otherwise, if a trustee
has discretion under the terms of a governing instrument to make a distribution of income or
principal to or for the benefit of one or more beneficiaries of a trust (the "first trust"), whether or not
restricted by any standard, then the trustee may instead exercise such discretion by appointing part
or all of the income or principal subject to the discretion in favor of a trustee of a second trust (the
"second trust") under a governing instrument separate from the governing instrument of the first
trust. Before exercising its discretion to appoint and distribute assets to a second trust, the trustee of
the first trust shall determine whether the appointment is necessary or desirable after taking into
account the purposes of the first trust, the terms and conditions of the second trust, and the
consequences of the distribution. For the purposes of this section, a trustee of the first trust is a
restricted trustee if either the trustee is a beneficiary of the first trust or if a beneficiary of the first
trust has a power to change the trustees within the meaning of § 55-2-17. In addition, the following
apply to all appointments made under this section:
(1) The second trust may only have as beneficiaries one or more of the beneficiaries of the
first trust:
(a) To or for whom a discretionary distribution of income or principal may be made
from the first trust; or
(b) To or for whom a distribution of income or principal may be made in the future
from the first trust at a time or upon the happening of an event specified under the
first trust;
(2) No restricted trustee of the first trust may exercise such authority over the first trust to the
extent that doing so could have the effect of:
(a) Benefiting the restricted trustee as a beneficiary of the first trust, unless the
exercise of such authority is limited by an ascertainable standard based on or
related to health, education, maintenance, or support; or
(b) Removing restrictions on discretionary distributions to a beneficiary imposed by
the governing instrument under which the first trust was created, except that a
provision in the second trust which limits distributions by an ascertainable standard
based on or related to the health, education, maintenance, or support of any such
beneficiary is permitted;
(3) No restricted trustee of the first trust may exercise such authority over the first trust to the
extent that doing so would have the effect of increasing the distributions that can be made
from the second trust to the restricted trustees of the first trust or to a beneficiary who may
change the trustees of the first trust within the meaning of § 55-2-17 compared to the
distributions that can be made to such trustee or beneficiary, as the case may be, under the
first trust, unless the exercise of such authority is limited by an ascertainable standard
based on or related to health, education, maintenance, or support;
(4) The provisions of subdivisions (2) and (3) only apply to restrict the authority of a trustee
if either a trustee, or a beneficiary who may change the trustee, is a United States citizen
or domiciliary under the Internal Revenue Code, or the trust owns property that would be
subject to United States estate or gift taxes if owned directly by such a person;
(5) In the case of any trust contributions which have been treated as gifts qualifying for the
exclusion from gift tax described in § 2503(b) of the Internal Revenue Code of 1986, by
reason of the application of I.R.C. § 2503(c), the governing instrument for the second trust
shall provide that the beneficiary's remainder interest shall vest no later than the date upon
which such interest would have vested under the terms of the governing instrument for
the first trust;
(6) The exercise of such authority may not reduce any income interest of any income
beneficiary of any of the following trusts:
(a) A trust for which a marital deduction has been taken for federal tax purposes under
I.R.C. § 2056 or § 2523 or for state tax purposes under any comparable provision
of applicable state law;
(b) A charitable remainder trust under I.R.C. § 664; or
(c) A grantor retained annuity trust under I.R.C. § 2702;
(7) The exercise of such authority does not apply to trust property subject to a presently
exercisable power of withdrawal held by a trust beneficiary to whom, or for the benefit
of whom, the trustee has authority to make distributions, unless after the exercise of such
authority, such beneficiary's power of withdrawal is unchanged with respect to the trust
property;
(8) The exercise of such authority is not prohibited by a spendthrift clause or by a provision
in the governing instrument that prohibits amendment or revocation of the trust;
(9) Any appointment made by a trustee shall be considered a distribution by the trustee
pursuant to the trustee's distribution powers and authority; and
(10) If the trustee's distribution discretion is not subject to a standard, or if the trustee's
distribution discretion is subject to a standard that does not create a support interest, then
the court may review the trustee's determination or any related appointment only pursuant
to § 55-1-43. Any other court review of the trustee's determination or any related
appointment may be made only pursuant to § 55-1-42.
Notwithstanding the foregoing provisions of this section, the governing instrument of the second
trust may grant a power of appointment to one or more of the beneficiaries of the second trust who
are beneficiaries of the first trust. The power of appointment may include the power to appoint trust
property to the holder of the power of appointment, the holder's creditors, the holder's estate, the
creditors of the holder's estate, or any other person, whether or not that person is a trust beneficiary.
This section applies to any trust governed by the laws of this state, including a trust whose
governing jurisdiction is transferred to this state.
Section 5. That § 55-1B-2 be amended to read as follows:
55-1B-2. An excluded fiduciary is not liable, either individually or as a fiduciary, for any of the
following:
(1) Any loss that results from compliance with a direction of the trust advisor, custodial
account owner, or authorized designee of a custodial account owner, including any loss
from the trust advisor breaching fiduciary responsibilities or acting beyond the trust
advisor's scope of authority;
(2) Any loss that results from a failure to take any action proposed by an excluded fiduciary
that requires a prior authorization of the trust advisor if that excluded fiduciary timely
sought but failed to obtain that authorization;
(3) Any loss that results from any action or inaction, except for gross negligence or willful
misconduct, when an excluded fiduciary is required, pursuant to the trust agreement or
any other reason, to assume the role of trust advisor, trust protector, investment trust
advisor, or distribution trust advisor.
Any excluded fiduciary is also relieved from any obligation to review or evaluate any direction
from a distribution trust advisor or to perform investment or suitability reviews, inquiries, or
investigations or to make recommendations or evaluations with respect to any investments to the
extent the trust advisor, custodial account owner, or authorized designee of a custodial account
owner had authority to direct the acquisition, disposition, or retention of any such investment. If the
excluded fiduciary offers such communication to the trust advisor, trust protector, investment trust
advisor, or distribution trust advisor or any investment person selected by the investment trust
advisor, such action may not be deemed to constitute an undertaking by the excluded fiduciary to
monitor or otherwise participate in actions within the scope of the advisor's authority or to constitute
any duty to do so.
Any excluded fiduciary is also relieved of any duty to communicate with or warn or apprise any
beneficiary or third party concerning instances in which the excluded fiduciary would or might have
exercised the excluded fiduciary's own discretion in a manner different from the manner directed by
the trust advisor, trust protector, investment trust advisor, or distribution trust advisor.
Absent contrary provisions in the governing instrument, the actions of the excluded fiduciary
(such as any communications with the trust advisor and others and carrying out, recording, and
reporting actions taken at the trust advisor's direction) pertaining to matters within the scope of
authority of the trust advisor, trust protector, investment trust advisor, or distribution trust advisor
shall be deemed to be administrative actions taken by the excluded fiduciary solely to allow the
excluded fiduciary to perform those duties assigned to the excluded fiduciary under the governing
instrument, and such administrative actions may not be deemed to constitute an undertaking by the
excluded fiduciary to monitor, participate, or otherwise take any fiduciary responsibility for actions
within the scope of authority of the trust advisor, trust protector, investment trust advisor, or
distribution trust advisor.
Nothing in subdivision (2) imposes an obligation or liability with respect to a custodian of a
custodial account.
Section 6. That § 55-1B-10 be amended to read as follows:
55-1B-10. The powers and discretions of an investment trust advisor shall be provided in the
trust instrument and may be exercised or not exercised, in the best interests of the trust, in the sole
and absolute discretion of the investment trust advisor and are binding on any other person and any
other interested party, fiduciary, and excluded fiduciary. Unless the terms of the governing
instrument provide otherwise, the investment trust advisor has the power to perform the following:
(1) Direct the trustee with respect to the retention, purchase, sale, or encumbrance of trust
property and the investment and reinvestment of principal and income of the trust;
(2) Vote proxies for securities held in trust;
(3) Select one or more investment advisers, managers, or counselors, including the trustee,
and delegate to them any of its powers; and
(4) Direct the trustee with respect to any additional powers and discretions over investment
and management of trust assets provided in the governing instrument.
Section 7. That § 55-1B-11 be amended to read as follows:
55-1B-11. The powers and discretions of a distribution trust advisor over any discretionary
distributions of income or principal, including distributions pursuant to an ascertainable standard or
other criteria and appointments pursuant to § 55-2-15, shall be provided in the trust instrument and
may be exercised or not exercised, in the best interests of the trust, in the sole and absolute discretion
of the distribution trust advisor and are binding on any other person and any other interested party,
fiduciary, and excluded fiduciary. Unless the terms of the document provide otherwise, the
distribution trust advisor shall direct the trustee with regard to all discretionary distributions to
beneficiaries and may direct appointments pursuant to § 55-2-15. The distribution trust advisor may
also provide direction regarding notification of qualified beneficiaries pursuant to § 55-2-13.
Section 8. That chapter 55-1 be amended by adding thereto a NEW SECTION to read as follows:
For purposes of sections 8 to 13, inclusive, of this Act, a no contest clause is a provision or
clause in a trust, that penalizes a qualified beneficiary for contesting a trust or instituting other
proceedings at law or equity relating to the trust estate, excluding proceedings related to trust
administration. Except as provided in sections 9 to 13, inclusive, of this Act, a no contest clause shall
be enforced unless probable cause exists for instituting the proceeding on the grounds of:
(1) Fraud;
(2) Duress;
(3) Revocation;
(4) Lack of contractual capacity;
(5) Undue influence;
(6) Mistake;
(7) Forgery; or
(8) Irregularity in the execution of the trust document.
Section 9. That chapter 55-1 be amended by adding thereto a NEW SECTION to read as follows:
A no contest clause shall be construed to carry out the settlor's intent. Except to the extent the
no contest clause in the trust is vague or ambiguous, extrinsic evidence is not admissible to establish
the settlor's intent concerning the no contest clause. The provisions of this section do not prohibit
such evidence from being admitted for any other purpose authorized by law.
Section 10. That chapter 55-1 be amended by adding thereto a NEW SECTION to read as
follows:
A no contest clause is not enforceable against a beneficiary to the extent the beneficiary, in good
faith and based upon probable cause, contests a provision that benefits any of the following persons:
(1) A person who drafted or transcribed the instrument;
(2) A person who gave directions to the drafter of the instrument concerning dispositive or
other substantive contents of the provisions or who directed the drafter to include the no
contest clause in the instrument. However, this subdivision does not apply if the settlor
affirmatively instructed the drafter to include the contents of the provision or the no
contest clause; or
(3) A person who acted as a witness to the instrument.
Section 11. That chapter 55-1 be amended by adding thereto a NEW SECTION to read as
follows:
Notwithstanding anything to the contrary in sections 8 to 13, inclusive, of this Act, a no contest
clause is enforceable against a beneficiary to the extent the beneficiary elects to contest or otherwise
challenge the settlor's signature whereby such a challenge does not in any manner constitute good,
probable, or reasonable cause if the settlor's signature was witnessed by nonrelative witnesses or a
duly qualified nonrelative notary public or both.
Section 12. That chapter 55-1 be amended by adding thereto a NEW SECTION to read as
follows:
The court may award attorneys fees and costs to the prevailing party in an action involving the
enforceability of a no contest provision.
Section 13. Sections 8 to 12, inclusive, of this Act, are effective for all trusts in existence on or
created after July 1, 2012.
Section 14. That § 55-4-31 be amended to read as follows:
55-4-31. A trustee is not liable to a beneficiary, as defined under this title or Title 29A, for
breach of trust from any or all of the duties, restrictions, and liabilities which would otherwise be
imposed on the trustee by this chapter, except as to the duties, restrictions, and liabilities imposed
by §§ 55-4-10 to 55-4-12, inclusive, if the beneficiary consented to the conduct constituting the
breach, released the trustee from liability for the breach, or ratified the transaction constituting the
breach, unless:
(1) The consent, release, or ratifications of the beneficiary were induced by improper conduct
of the trustee; or
(2) At the time of the consent, release, or ratification, the beneficiary did not have knowledge
of the beneficiary's rights or of the material facts relating to the breach.
Any such beneficiary may release the trustee from liability to such beneficiary for past violations
of any of the provisions of this chapter. No consideration is required for the consent, release, or
ratification to be valid.
Section 15. That § 55-16-5 be amended to read as follows:
55-16-5. Any individual may serve as an investment trust advisor described in subdivision 55-1B-1(6), notwithstanding that such individual is the transferor of the qualified disposition, but such
an individual may not otherwise serve as a fiduciary of a trust that is a qualified disposition except
with respect to the retention of the veto right permitted by subdivision 55-16-2(2). While serving as
an advisor of the trust, the individual may have all powers authorized by statute or by the trust
instrument, including the power to vote by proxy any stock owned by the trust.
Section 16. That § 55-16-10 be amended to read as follows:
55-16-10. A cause of action or claim for relief with respect to a fraudulent transfer of a settlor's
assets under § 55-16-9 is extinguished unless the action under § 55-16-9 is brought by a creditor of
the settlor who meets one of the following requirements:
(1) Is a creditor of the settlor before the settlor's assets are transferred to the trust, and the
action under § 55-16-9 is brought within the later of:
(a) Two years after the transfer is made; or
(b) Six months after the transfer is or reasonably could have been discovered by the
creditor if the creditor:
(i) Can demonstrate that the creditor asserted a specific claim against the settlor
before the transfer; or
(ii) Files another action, other than an action under § 55-16-9, against the settlor
that asserts a claim based on an act or omission of the settlor that occurred
before the transfer, and the action described in this sub-subsection is filed
within two years after the transfer; or
(2) Becomes a creditor subsequent to the transfer into trust, and the action under § 55-16-9
is brought within two years after the transfer is made.
In any action described in § 55-16-9, the burden to prove the matter by clear and convincing
evidence is upon the creditor.
Section 17. That § 55-16-11 be amended to read as follows:
55-16-11. A qualified disposition that is made by means of a disposition by a transferor who is
a trustee is deemed to have been made as of the time, whether before, on, or after July 1, 2005, the
property that is the subject of the qualified disposition was originally transferred to the transferor,
or any predecessor trustee, making the qualified disposition in a form that meets the requirements
of subdivisions 55-16-2(2) and (3). Further, the provisions of this section apply to determine the date
the transfer is deemed to have been made, notwithstanding that the original transfer was to a trust
originally within or outside of the jurisdiction of South Dakota.
Section 18. That § 55-16-12 be amended to read as follows:
55-16-12. Notwithstanding any law to the contrary, a creditor, including a creditor whose claim
arose before or after a qualified disposition, or any other person has only such rights with respect to
a qualified disposition as are provided in §§ 55-16-9 to 55-16-16, inclusive, and no such creditor nor
any other person has any claim or cause of action against the trustee, or advisor, described in § 55-16-4, of a trust that is the subject of a qualified disposition, or against any person involved in the
counseling, drafting, preparation, execution, or funding of a trust that is the subject of a qualified
disposition. In addition to the provisions of § 55-1-43, at no time is a qualified person, as defined
in § 55-16-3, personally liable to a creditor of a transferor or any other person for distributions made
by the qualified person, before the creditor or person notified the qualified person, in writing, that
a claim or cause of action existed. This applies regardless of whether the distributions are made to
or for the benefit of the transferor or a beneficiary during the period in which a creditor or other
person could make a claim as provided in § 55-16-10.
Section 19. That § 55-16-2 be amended to read as follows:
55-16-2. For the purposes of this chapter, a trust instrument, is an instrument appointing a
qualified person for the property that is the subject of a disposition, which instrument:
(1) Expressly incorporates the law of this state to govern the validity, construction, and
administration of the trust;
(2) Is irrevocable, but a trust instrument may not be deemed revocable on account of its
inclusion of one or more of the following:
(a) A transferor's power to veto a distribution from the trust;
(b) An inter vivos power of appointment, other than an inter vivos power to appoint
to the transferor, the transferor's creditors, the transferor's estate, or the creditors
of the transferor's estate, exercisable by will or other written instrument of the
transferor effective only upon the transferor's death;
(c) A testamentary power of appointment;
(d) The transferor's potential or actual receipt of income, including rights to such
income retained in the trust instrument;
(e) The transferor's potential or actual receipt of income or principal from a charitable
remainder unitrust or charitable remainder annuity trust as such terms are defined
in § 664 of the Internal Revenue Code of 1986, 26 U.S.C. § 664, as of January 1,
2009;
(f) The transferor's receipt each year of a percentage of the value as determined from
time to time pursuant to the trust instrument, but not exceeding the amount that
may be defined as income under § 643(b) of the Internal Revenue Code of 1986,
26 U.S.C. § 643(b), as of January 1, 2009;
(g) The transferor's potential or actual receipt or use of principal if such potential or
actual receipt or use of principal would be the result of a qualified person or
qualified persons, including a qualified person or qualified persons acting at the
direction of a trust advisor described in this section, acting either in such qualified
person's or qualified persons' sole discretion or pursuant to an ascertainable
standard contained in the trust instrument;
(h) The transferor's right to remove a trustee, protector, or trust advisor and to appoint
a new trustee, protector, or trust advisor, other than a trustee who is a related or
subordinate party with respect to the transferor within the meaning of § 672(c) of
the Internal Revenue Code of 1986, 26 U.S.C. § 672(c), as of January 1, 2009;
(i) The transferor's potential or actual use of real property held under a qualified
personal residence trust within the meaning of such term as described in § 2702(c)
of the Internal Revenue Code of 1986, 26 U.S.C. § 2702(c), as of January 1, 2009;
or
(j) A pour back provision that pours back to the transferor's will or revocable trust all
or part of the trust assets; and
(3) Provides that the interest of the transferor or other beneficiary in the trust property or the
income therefrom may not be transferred, assigned, pledged, or mortgaged, whether
voluntarily or involuntarily, before the qualified person or qualified persons actually
distribute the property or income therefrom to the beneficiary, and such provision of the
trust instrument shall be deemed to be a restriction on the transfer of the transferor's
beneficial interest in the trust that is enforceable under applicable nonbankruptcy law
within the meaning of § 541(c)(2) of the Bankruptcy Code, 11 U.S.C. § 541(c)(2), as of
January 1, 2009.
A disposition by a trustee that is not a qualified person to a trustee that is a qualified person may
not be treated as other than a qualified disposition solely because the trust instrument fails to meet
the requirements of subdivision (1) of this section.
Section 20. That § 55-1-32 be amended to read as follows:
55-1-32. In the event that a party challenges a settlor or a beneficiary's influence over a trust,
none of the following factors, alone or in combination, may be considered dominion and control over
a trust:
(1) The settlor or a beneficiary serving as a trustee or a co-trustee as described in § 55-1-28;
(2) The settlor or a beneficiary holds an unrestricted power to remove or replace a trustee;
(3) The settlor or a beneficiary is a trust administrator, a general partner of a partnership, a
manager of a limited liability company, an officer of a corporation, or any other
managerial function of any other type of entity, and part or all of the trust property
consists of an interest in the entity;
(4) A person related by blood or adoption to the settlor or a beneficiary is appointed as
trustee;
(5) The settlor's or a beneficiary's agent, accountant, attorney, financial advisor, or friend is
appointed as trustee;
(6) A business associate is appointed as a trustee;
(7) A beneficiary holds any power of appointment over any or all of the trust property;
(8) The settlor holds a power to substitute property of equivalent value;
(9) The trustee may loan trust property to the settlor for less than a full and adequate rate of
interest or without adequate security;
(10) The distribution language provides any discretion;
(11) The trust has only one beneficiary eligible for current distributions; or
(12) The beneficiary serving as a trust advisor for investments under subdivision 55-1B-1(6).
Section 21. That chapter 55-2 be amended by adding thereto a NEW SECTION to read as
follows:
An excluded fiduciary as defined in § 55-1B-1 who receives tax information regarding an asset
or entity owned by the trust, any trustee of a trust that holds an asset or entity owned by the trust but
who does not manage the asset or entity, and any trustee who receives tax information from the
settlor, the settlor's agents, or other individuals regarding matters that have tax implications to the
trust or trust beneficiaries, may rely, without liability, on tax information it receives in any of the
above situations. By way of example, if a trustee holds in trust a limited liability company interest
but does not manage the limited liability company, the trustee may rely, without limitation, on any
tax information received from the manager of the limited liability company or its accountant or
agents.
The tax information that a trustee may rely on in the above situations may include the following:
(1) The accuracy of any information reported on a tax return;
(2) A copy of a tax return provided by the tax return preparer or the taxpayer filing the return;
(3) The representation of another fiduciary or tax advisor who filed or prepared a tax return
as to the amount of any item reported on that return;
(4) The settlor's representation whether or not a gift or generation skipping transfer tax form
has ever been filed as well as how much of the respective exemptions have been utilized;
or
(5) The direction from the grantor's or settlor's tax advisors based upon any contribution or
distribution, or both, for the appropriate tax filings.
An entity, for purposes of this section, shall be defined as set out in subdivisions 47-34A-101(6)
and 47-34A-101(13).
This section applies to any trust in existence on or created on or after July 1, 2012.
Section 22. That § 55-5-9 be amended to read as follows:
55-5-9. The trustee shall, within a reasonable time after the acceptance of the trusteeship, review
trust assets and make and implement decisions concerning the retention and disposition of original
pre-existing investments in order to conform to the provisions of this section. The trustee's decision
to retain or dispose of an asset may properly be influenced by the asset's special relationship or value
to the purposes of the trust or to some or all of the beneficiaries, consistent with the trustee's duty
of impartiality.
If a trust owns an interest in a closely held entity, and the trust agreement, or other document
signed by the settlor or signed by a majority of the current income or principal beneficiaries, if the
settlor is deceased, provides that the trustee has no duty to inquire or review the activities of the
closely held entity, no trustee is liable to a beneficiary to the extent that the trustee acted in reliance
on the provisions of the trust or court order.
For purposes of this section, the term, closely held entity, means any entity in which the
following persons in aggregate own at least twenty percent of the entity:
(1) The settlor;
(2) The settlor's grandparents or their descendants;
(3) The settlor's spouse; or
(4) Any trust created by anyone of the aforementioned persons.
If a trust was in existence on or before July 1, 2012, and a collateral document relieved the
trustee of the duty to inquire or review the activities of a closely held entity as provided in this
section, then the trustee may elect to have this section apply upon providing sixty days written notice
of the election to the settlor or to the current income or principal beneficiaries if the settlor is
deceased.
Section 23. That § 55-9-3 be amended to read as follows:
55-9-3. Such trust shall be liberally construed by the courts so that the intentions of the donor
thereof shall be carried out whenever possible, and no such trust shall fail solely because the donor
has imperfectly outlined the purpose and object of such charity or the method of administration.
A grantor may maintain an action to enforce a charitable trust under this section and may
designate in writing a person or persons, whether or not born at the time of such designation, to
enforce a charitable trust under this section. In any such action, the attorney general shall be provided
notice as provided in § 21-22-18.
Section 24. That § 55-9-5 be amended to read as follows:
55-9-5. Except as otherwise set forth in § 55-9-3, the attorney general shall represent the
beneficiaries in all cases arising under this chapter, and the attorney general shall enforce such trusts
by proper proceedings in the courts.
Section 25. That chapter 55-3 be amended by adding thereto a NEW SECTION to read as
follows:
Except as otherwise expressly provided by the terms of a governing instrument specifically
addressing the governing law for trust administration or by court order, the laws of South Dakota
shall govern the administration of a trust while the trust is administered in South Dakota.
Section 26. That chapter 43-6 be amended by adding thereto a NEW SECTION to read as
follows:
No provision directing or authorizing accumulation of trust income is invalid.
Section 27. That § 55-5-17 be amended to read as follows:
55-5-17. (a) Unless otherwise required by the terms of the trust instrument or court order, no
trustee of a trust, with respect to acquiring, retaining, or disposing of a contract of insurance or
holding one or more insurance contracts upon the life of the settlor, or the lives of the settlor and the
settlor's spouse, has the following duties:
(1) To determine whether any such contract is or remains a proper investment;
(2) To investigate the financial strength or changes in the financial strength of the life
insurance company;
(3) To make a determination of whether to exercise any policy options available under any
such contract;
(4) To make a determination of whether to diversify any such contract relative to one another
or to other assets, if any, administered by the trustee; or
(5) To inquire about changes in the health or financial condition of the insured or insured's
relative to any such contract.
A trustee of a revocable or an irrevocable trust, or of either a directed trust pursuant to
chapter 55-1B or a delegated trust pursuant to § 55-5-16, is not liable to the beneficiaries
of the trust or to any other party for any loss arising from the absence of those duties upon
the trustee.
(b) The trustee of a trust described under subsection (a) of this section which was established
prior to the effective date of this section, shall notify the settlor in writing that, unless the settlor
provides written notice to the contrary to the trustee within sixty days of the trustee's notice, the
provisions of subsection (a) of this section shall apply to the trust. Subsection (a) of this section does
not apply if, within sixty days of the trustee's notice, the settlor notifies the trustee that subsection
(a) does not apply.
An Act to revise various trust provisions.
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I certify that the attached Act
originated in the
HOUSE as Bill No. 1045
____________________________
Chief Clerk
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____________________________
Speaker of the House
____________________________
Chief Clerk
____________________________
President of the Senate
____________________________
Secretary of the Senate
House Bill No. 1045
File No. ____
Chapter No. ______
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Received at this Executive Office
this _____ day of _____________ ,
20____ at ____________ M.
By _________________________
for the Governor
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The attached Act is hereby
approved this ________ day of
______________ , A.D., 20___
____________________________
Governor
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STATE OF SOUTH DAKOTA,
ss.
Office of the Secretary of State
Filed ____________ , 20___
at _________ o'clock __ M.
____________________________
Secretary of State
By _________________________
Asst. Secretary of State
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