The Trust That Never Has to End: One Small State Abolished the Death Date Every Trust Used to Carry and $900 Billion of Family Money Has Moved There. You Don’t Have to Live There to Use It

South Dakota did something in 1983 that no other state had done at the time: it deleted the expiration date on trusts. Anyone can set up a family trust in the state, name a South Dakota trustee, and route assets through it without ever moving there. The result is a dynasty trust, a legal structure that can hold and pay out family wealth for generations without triggering federal estate or gift tax at each pass through the family tree.

Trust With No Expiration Date, Explained

For centuries, trusts carried a built-in death clock called the Rule Against Perpetuities. In most states, a trust had to wind up within about 21 years after the death of a person who was alive when the trust was created. South Dakota repealed that rule outright. A trust drafted under South Dakota law can hold assets indefinitely, distribute income to descendants across dozens of generations, and skip the federal generation-skipping transfer tax on the appreciation inside the trust when it is funded within the current federal exemption.

The William Randolph Hearst arrangement illustrates the older regime. His 1951 testamentary trust was written under pre-repeal rules, so its termination is tied to family members alive at his death. Once that generation is gone, the trust must wind down. A South Dakota dynasty trust has no such clock.

Where the Rule Actually Lives

The statutory basis is South Dakota Codified Laws chapter 43-5, which addresses restraints on alienation. SDCL 43-5-1 abolished the common-law Rule Against Perpetuities in 1983, and subsequent revisions confirmed that trusts can continue in perpetuity. The federal tax treatment sits on top of that: the Internal Revenue Code sections governing the generation-skipping transfer tax (IRC 2601 through 2664) allow a settlor to allocate the lifetime GST exemption to a trust at funding, after which future appreciation and distributions to grandchildren, great-grandchildren, and beyond are shielded from the 40% GST rate.

Who Can Actually Use It

You do not have to live in the state to use it. A settlor based in California, New York, or even overseas can create a South Dakota trust by meeting the state’s situs requirements, which include having a South Dakota trustee, such as an in-state trust company or a qualified individual, administering the trust from within the state, and keeping trust records there. Trusts originally drafted in other states can also be moved through decanting or a court-approved change of situs, as long as the originating state’s rules allow it.

The economic landscape helps explain why South Dakota draws so much interest. The state ranks second overall on the 2025 State Tax Competitiveness Index, with no personal income tax, no capital gains tax, and no state-level tax on trust income for nonresident beneficiaries. Its cost of living sits at 88.586, well under the national average, with per capita income at $75,499.

Mechanics of Setting One Up

1. Retain an estate attorney to draft a trust governed by South Dakota law, naming a South Dakota trustee.
2. Fund the trust while allocating the federal GST exemption, currently set annually by the IRS and indexed for inflation. The 2026 lifetime estate and GST exemption is $15 million per individual under the One Big Beautiful Bill Act, effective January 1, 2026.
3. Consider a directed trust structure, which separates investment authority from administrative trustee duties, a feature codified in South Dakota’s Directed Trust Act.
4. File the federal Form 709 to report the gift and lock in the GST allocation.
5. Layer in a discretionary or spendthrift provision. South Dakota’s self-settled asset protection statute permits domestic asset protection trusts with a two-year seasoning period against future creditors.

Gotchas Buyers Rarely Consider Up Front

Home-state tax does not always disappear. Several states, including California, tax trust income based on the residence of the trustee, the settlor, or the beneficiary, regardless of where the trust is situated. Moving a trust to South Dakota can reduce or eliminate that liability, but only after careful review of the home-state throwback and residency rules. Situs is one line item on a longer estate checklist (we put the rest, from beneficiary forms to titling, in a free guide here).

The GST exemption is the single hardest number to get right. Amounts contributed above the exemption at funding, or appreciation that occurs before proper allocation, remain exposed to the 40% GST rate at each generational skip. And while the trust itself can last forever, the assets inside still face federal income tax on undistributed earnings at compressed trust brackets, which reach the top marginal rate above roughly $15,650 of taxable income in 2026. Distributing income to beneficiaries pushes that liability onto their personal returns, which is often the point.

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