55-1A-5. Retention of trust property by trustee.

A trustee may collect, hold, and retain trust assets until, in his judgment, disposition of the assets should be made, without regard to any effect the retention may have upon the diversification of the trust estate. Trust property may be retained even though it includes an asset in which its trustee is personally interested.

Source: SL 1979, ch 336, § 5.

55-1A-6. Additions to trust assets.

A trustee may receive additions to the assets of his trust from any source.

Source: SL 1979, ch 336, § 6.

55-1A-7. Operation of business by trustee.

A trustee may continue or participate in the operation of any business or other enterprise, and effect the incorporation, dissolution, or other change in the form of the organization of the business or enterprise.

Source: SL 1979, ch 336, § 7.

55-1A-8. Acquisition of undivided interest in trust asset.

A trustee may acquire an undivided interest in a trust asset in which he, in any trust capacity, holds an undivided interest.

Source: SL 1979, ch 336, § 8.

55-1A-9. Investment of trust assets.

A trustee may invest and reinvest trust assets in any property or in an undivided interest in any property, wherever located, including bonds, debentures, secured or unsecured notes, preferred or common stock of corporations, real estate or improvements thereon or any interest therein, oil and mineral leases or royalty or similar interests, and interests in trusts including investment trusts and common trust funds maintained by a corporate trustee and any affiliated investments as defined in § 55-1A-9.1. Any such investments may be made, regardless of any lack of diversification.

Source: SL 1979, ch 336, § 9; SL 1993, ch 354; SL 2007, ch 247, § 6.

55-1A-9.1. Affiliated investments.

(a) As used in this section:

(1)    "Investment" means any security as defined in § 2(a)(1) of the Securities Act of 1933, any contract of sale of a commodity for future delivery within the meaning of § 2(I) of the Commodity Exchange Act, or any other asset permitted for trustee accounts pursuant to the terms of this title or by the terms of the governing instrument, including by way of illustration and not limitation, individual portfolios of investment holdings, shares or interests in a private investment fund (including a private investment fund organized as a limited partnership, limited liability company, trust or other form, a statutory or common law business trust, or a real estate investment trust), joint venture or other general or limited partnership, or an open-end or closed-end management type investment company or investment trust registered, unregistered, or exempt from registration under the Investment Company Act of 1940;

(2)    "Affiliate" means any corporation or other entity that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with the trustee;

(3)    "Affiliated investment" means an investment for which the trustee or an affiliate of the trustee acts as investment adviser, sponsor, administrator, distributor, placement agent, underwriter, broker, custodian, transfer agent, registrar or in any other capacity for which it receives or has received a fee or commission from such investment or an investment acquired or disposed of in a transaction for which the trustee or an affiliate of the trustee receives or has received a fee or commission;

(4)    "Fee or commission" means compensation paid to a trustee or an affiliate thereof on account of its services to or on behalf of an investment, including by way of illustration and not limitation, advisory fees, management fees, brokerage fees, service fees, special performance fees, profit allocations, and expense reimbursements.

(b) In the absence of an express prohibition in the trust instrument, a trustee may purchase, sell, hold or otherwise deal with an affiliate or an interest in an affiliated investment and, upon satisfaction of the conditions stated in subsection (c) of this section, such trustee may receive trustee compensation from such account at the same rate as the trustee would otherwise be entitled to be compensated.

(c) A trustee seeking compensation pursuant to subsection (b) of this section shall disclose to those beneficiaries, as defined in § 55-2-13, all fees, commissions, compensation or other benefits and profits paid or to be paid by the account, or received or to be received by an affiliate arising from such affiliated investment. The disclosure required under this subsection may be given either in a copy of the prospectus or any other disclosure document prepared for the affiliated investment under federal or state securities laws or in a written summary that includes all fees, commissions, compensation or other benefits and profits received or to be received by the trustee or any affiliate of the trustee and an explanation of the manner in which such fees, commissions, compensation or other benefits and profits are calculated (either as a percentage of the assets invested or by some other method). Such disclosure shall be made at least annually unless there has been no increase in the rate at which such fees or commissions are calculated since the most recent disclosure. Notwithstanding the foregoing provisions of this subsection, no such disclosure is required if:

(i)    The governing instrument or a court order expressly authorizes the trustee to invest the trust account in affiliated investments or otherwise deal with an affiliate or an interest in an affiliated investment; or

(ii)    The directed trustee is acting at the direction of an investment trust advisor pursuant to chapter 55-1B.

(d) A trustee that has complied with subsection (c) of this section (whether by making the applicable disclosure or by relying on the terms of a governing instrument or court order) shall have full authority to administer an affiliated investment (including the authority to vote proxies thereon) without regard to the affiliation between the trustee and the investment.

(e) If the recipients of information regarding the trust's existence have been restricted, eliminated, or modified pursuant to § 55-2-13, then the notification described in subsection (c) is subject to such restriction, modification, or elimination.

Source: SL 2007, ch 247, § 7; SL 2009, ch 252, § 12; SL 2014, ch 226, § 19; SL 2015, ch 240, § 16.

55-1A-10. Deposit of trust funds in bank.

A trustee may deposit trust funds in a bank, including a bank operated by himself, or in a state or federal savings and loan association.

Source: SL 1979, ch 336, § 10.

55-1A-11. Disposal of trust assets.

A trustee may acquire, sell, or otherwise dispose of an asset, at public or private sale, for cash or on credit, with or without security as he deems advisable, and he may manage, develop, exchange, partition, change the character of, or abandon a trust asset or any interest therein.

Source: SL 1979, ch 336, § 11.

55-1A-12. Grant or taking of option for disposition of assets.

A trustee may grant an option for the sale or other disposition of a trust asset, or take an option for the acquisition of any asset.

Source: SL 1979, ch 336, § 12.

55-1A-13. Leases by trustees.

A trustee may enter into a lease as lessor or lessee, with or without an option to purchase or renew, even if the term of the lease or renewal thereof, or of the option, extends beyond the term of the trust.

Source: SL 1979, ch 336, § 13.

55-1A-14. Repairs by trustee--Removal or demolition.

A trustee may make ordinary or extraordinary repairs, improvements, or alterations in buildings or other structures or in any other trust asset, and he may remove or demolish any improvements.

Source: SL 1979, ch 336, § 14.

55-1A-15. Razing or erection of party walls or buildings.

A trustee may raze existing, or erect new, party walls or buildings, alone or jointly with owners of adjacent property.

Source: SL 1979, ch 336, § 15.

55-1A-16. Land development or dedication--Valuation adjustments.

A trustee may subdivide, develop or dedicate land to public use; make or obtain the vacation of plats and adjust boundaries; adjust differences in valuation on the exchange or partition of land by giving or receiving consideration; or dedicate easements to public use without consideration.

Source: SL 1979, ch 336, § 16.

55-1A-17. Mineral and natural resource leases and explorations.

A trustee may enter into a lease or arrangement for the exploration for and removal of oil, gas and other minerals or other natural resources, and he may enter into pooling and unitization agreements.

Source: SL 1979, ch 336, § 17.

55-1A-18. Insurance.

A trustee may insure the assets of his trust against damage or loss, and the trustee against liability to third persons.

Source: SL 1979, ch 336, § 18.

55-1A-19. Voting stock or securities--Voting trust agreements.

A trustee may vote shares of stock or other securities held in trust, in person or by general or limited proxy, and he may enter into voting trust agreements on such terms and for such periods as he deems advisable.

Source: SL 1979, ch 336, § 19.

55-1A-20. Payment of calls, assessments, and other sums charged against corporate securities.

A trustee may pay calls, assessments, and any other sums chargeable or accruing against or on account of shares of stock, bonds, debentures, or other corporate securities held in trust.

Source: SL 1979, ch 336, § 20.

55-1A-21. Corporate powers--Stocks--Reorganizations and mergers--Sales and leases.

A trustee may sell or exercise stock subscription or conversion rights; participate in foreclosures, reorganizations, consolidations, mergers or liquidations; and consent, directly or through a committee or other agent, to corporate sales, leases and encumbrances. In the exercise of such powers a trustee may, where he deems such course to be expedient, deposit stocks, bonds or other securities with any protective or other similar committee, under such terms and conditions respecting the deposit thereof as the trustee may approve.

Source: SL 1979, ch 336, § 21.

55-1A-22. Holding stock in nominee's name without disclosing fiduciary relationship.

A trustee may hold any stock or other security in the name of a nominee or nominees, without disclosure of any fiduciary relationship, but he shall be liable for any and all acts and omissions of the nominee relating to such assets.

Source: SL 1979, ch 336, § 22.

55-1A-23. Borrowing money against trust assets.

A trustee may borrow money, and mortgage or otherwise encumber or pledge trust assets, for a term within or extending beyond the term of his trust, in connection with the exercise of any power vested in himself.

Source: SL 1979, ch 336, § 23.

55-1A-24. Contracts binding upon trust.

A trustee may enter into contracts binding upon his trust which are reasonably incident to the administration of the trust and which he believes to be for the best interests of the trust.

Source: SL 1979, ch 336, § 24.

55-1A-25. Claims in favor of or against trust or trustee.

A trustee may pay, compromise, contest, submit to arbitration, or otherwise settle any and all claims in favor of or against his trust or himself as trustee.

Source: SL 1979, ch 336, § 25.

55-1A-26. Release of claim or lien.

A trustee may release, in whole or in part, any claim or lien belonging to his trust.

Source: SL 1979, ch 336, § 26.

55-1A-27. Payment of trust administration expenses.

A trustee may pay taxes, assessments, compensation of himself, and other expenses incurred in the collection, care, administration and protection of his trust.

Source: SL 1979, ch 336, § 27.

55-1A-28. Creation of reserves.

A trustee may create reserves out of income for depreciation, obsolescence, or amortization, or for the depletion of mineral or timber properties.

Source: SL 1979, ch 336, § 28.

55-1A-29. Payment of sum distributable to minor or other beneficiary under legal disability--Methods.

A trustee may make payment of any sum distributable to a minor or other beneficiary under legal disability, without liability to himself, by paying the sum in any one or more of the following ways:

(1)    Directly to the beneficiary;

(2)    To the conservator of the beneficiary;

(3)    Directly for the maintenance, education and general welfare of the beneficiary;

(4)    To a parent of the beneficiary; or

(5)    To anyone who has custody and care of the person of the beneficiary.

Source: SL 1979, ch 336, § 29; SL 1993, ch 213, § 253.

55-1A-30. Distribution of property and money.

A trustee may effect distribution of property and money in divided or undivided interests, and adjust the resulting differences in valuation.

Source: SL 1979, ch 336, § 30.

55-1A-31. Employment of agents and assistants.

A trustee may employ attorneys, accountants, investment advisors, agents or other persons, even if they are associated with himself, to advise or assist himself in the performance of his duties; act without independent investigation upon their recommendations; and instead of acting personally, employ one or more agents to perform any act of administration, whether or not such act is discretionary.

Source: SL 1979, ch 336, § 31.

55-1A-32. Prosecution or defense of actions and proceedings.

A trustee may prosecute or defend actions, claims or proceedings for the protection of trust assets or of the trustee in the performance of the trustee's duties. However, a trustee has no duty to prosecute, or to defend or continue to defend the trust or its assets in any action, through exercise of judicial process or otherwise, to reach the assets of the trust in satisfaction of a claim against the trust, a beneficiary or the settlor of a trust unless:

(1)    The trustee is reasonably satisfied that the readily marketable assets of the trust are sufficient to fully indemnify the trustee for all the liabilities and expenses, including professional fees and expense of counsel, accountants, and expert witnesses, that the trustee may incur in so prosecuting or defending the trust or its assets; or

(2)    If the trustee is not satisfied that the settlor or the beneficiaries have provided the trustee with indemnity, supported with such security as may be satisfactory to the trustee in its sole discretion, as is then and will be sufficient to fully indemnify the trustee.

Unless otherwise provided in the trust agreement, a trustee who is no longer serving due to resignation or removal, whether by judicial process or pursuant to the trust agreement, or as a result of the trust terminating, does not have a duty to defend or continue to prosecute or defend the trust or its assets in any action, whether the trust is in existence or not at the time of such action.

Source: SL 1979, ch 336, § 32; SL 2017, ch 204, § 13; SL 2021, ch 207, § 11.

55-1A-32.1. Trustee immunity from liability for failure to prosecute, defend, or continue to defend.

If the trustee fails to prosecute, defend, or continue to defend the trust or its assets because the conditions set forth in subdivision 55-1A-32(1) or (2) have not been fulfilled, the trustee is not liable for any such failure even if the failure, including without limitation a withdrawal from a proceeding, may result in the granting or awarding of relief against the trustee or the trust, including without limitation a distribution of trust assets in satisfaction of a claim.

For purposes of chapter 55-1A, the term, prosecute, or, defend or continue to defend, means:

(1)    Instituting, participating in, intervening in or defending a lawsuit, action in equity or administrative, arbitration or mediation proceeding (collectively a proceeding); or

(2)    Taking any other action to resist such claim.

This section and § 55-1A-32 control unless the governing instrument specifically provides otherwise.

Source: SL 2017, ch 204, § 14.

55-1A-33. Advance of income or loan to beneficiary--Lien.

A trustee may advance income or make loans out of trust property to a beneficiary on terms and conditions the trustee considers to be fair and reasonable under the circumstances, for which such advance or loan the trustee shall have a lien on the future benefits of such beneficiary.

Source: SL 1979, ch 336, § 33; SL 2011, ch 212, § 18.

55-1A-34. Advance of money for protection of trust--Lien.

A trustee may advance money for the protection of his trust or its assets, and for all expenses and liabilities sustained or incurred in or about the administration or protection of the trust, or because of the holding or ownership of any trust assets. Such trustee shall have a lien on the trust assets and may reimburse himself, with interest, out of the trust assets for the advances.

Source: SL 1979, ch 336, § 34.

55-1A-35. Execution and delivery of instruments.

A trustee may execute and deliver all instruments which will accomplish or facilitate the exercise of the powers vested in himself.

Source: SL 1979, ch 336, § 35.

55-1A-35.1. Electronic execution of documents.

If otherwise validly executed, the following documents may be executed in accordance with chapter 53-12:

(1)    The governing instrument of an express trust, or other document, other than a will or codicil as defined in title 29A;

(2)    The resignation, removal, appointment, or acceptance of appointment of any trustee, any advisor or protector, or of any designated representation addressed in title 55;

(3)    A consent, release, ratification, or indemnification addressed in title 55; and

(4)    Any other document addressed by title 55 to the extent it is not excluded from the scope of chapter 53-12.

Notwithstanding any provision of chapter 53-12 to the contrary, the documents under this section are deemed to be a transaction within the meaning of subdivision 53-12-1(17) and are within the scope of chapter 53-12.

Source: SL 2023, ch 161, § 5.

55-1A-36. Holding of two or more trusts with undivided interests.

A trustee may hold two or more trusts or parts of trusts created by the same instrument, as an undivided whole, without separation between such trusts or parts of such trusts; provided that, such separate trusts or parts of such trusts shall have undivided interests and that no such holding shall defer the vesting of any estate in possession or otherwise.

Source: SL 1979, ch 336, § 36.

55-1A-37. Citation of chapter.

This chapter may be cited or referred to as the "South Dakota Trustees' Powers Act."

Source: SL 1979, ch 336, § 37.

55-1A-38. Trustee may perform necessary and appropriate acts.

A trustee may perform such other acts, which, in the judgment of the trustee, may be necessary or appropriate for the proper management, investment, and distribution of the trust estate.

Source: SL 1998, ch 282, § 37.

55-1A-39. Disclaimer of powers by trustee--Time limit.

Any power granted to a trustee in any written trust instrument may be disclaimed by that trustee in the manner provided by law for disclaimers, but without regard to the time limits provided by law for disclaimers. Upon such disclaimer, the powers so disclaimed shall cease to exist as to that trustee.

Source: SL 1998, ch 282, § 39.

55-1A-40. Trust name change.

A trustee may change the name of an irrevocable trust if the trustee deems such action to be in the best interests of the trust and its beneficiaries.

Source: SL 2011, ch 212, § 13.

55-1A-41. Co-trustee appointment--Powers.

Unless specifically restricted by the governing instrument, a trustee may appoint an individual or a corporate fiduciary as a co-trustee. The appointed co-trustee may serve only as long as the appointing trustee serves, or as long as the last to serve if more than one trustee appointed the co-trustee. The appointed co-trustee may not become a successor trustee upon the death, resignation, or incapacity of the appointing trustee, unless appointed under the terms of the governing instrument or unless no other successor trustee, or method for appointing a successor trustee, is provided in the governing instrument.

The powers and the responsibilities of the appointed co-trustee may be limited by the appointing trustee in a writing signed by the appointing trustee at the time of the appointment. If the powers or responsibilities are so limited, the powers or responsibilities of the co-trustee shall be limited as set forth in writing. Unless the powers or responsibilities are so limited, the appointed co-trustee may exercise all the powers of the appointing trustee. The combined powers of the appointed co-trustee and the appointing trustee may not exceed the powers of the appointing trustee alone. The trustee appointing a co-trustee may, in writing, revoke the appointment at any time, with or without cause.

Unless specifically restricted by the governing instrument, if the governing instrument gives a fiduciary other than the trustee the power to remove and replace the trustee, such power includes the power to appoint a co-trustee to serve with the current trustee.

If an appointment under this section confers upon the appointed co-trustee, to the exclusion of another co-trustee, the power to take certain actions, including the power to direct or prevent certain actions of the trustees, the limitations on liability and the relief from duties and obligations afforded an excluded fiduciary under § 55-1B-2 apply to a co-trustee who does not hold such power.

If the governing instrument is silent concerning the trustee's power to appoint a co-trustee, the trustee shall notify in writing, the trustor, if living, and all current income and principal beneficiaries at least thirty days prior to the effective date of the trustee's exercise of the power granted under this section. The notice, which shall include a copy of the proposed action, shall advise the trustor and current beneficiaries that if they object to the trustee's appointment they need to file a written objection with the trustee prior to the effective date set out in the notice of the proposed action. If an objection is received by the trustee, prior to the effective date of the appointment, the trustee may not appoint a co-trustee. However, this section does not limit the power of the trustee under law to petition the court for approval of the appointment. If no objection has been timely made, the proposed appointment becomes effective on the later of the date set out in the notice or thirty days after notice has been given. The notice must be sent by any means allowed under the terms of the trust instrument, by mail with postage prepaid to the last known address of the trustor or current beneficiary, or by means otherwise allowed by law.

A governing instrument may provide for the appointment of two or more trustees and confer or allocate on one or more of the trustees, to the exclusion of other trustees, the power to direct, veto, or overrule specified actions or decisions of other trustees, or with sole responsibility for certain trustee duties. Any excluded trustee shall act in accordance with the exercise of the power, is not liable for complying with the exercise of the power, and has no obligation to review, inquire, investigate, or undertake any recommendations or evaluations with respect to the exercise of the power. A trustee having the power has the sole duty to account to the beneficiaries with respect to the exercise of the power and, if found liable for a breach of the trustee's duties with respect to the exercise of the power, is liable as if that trustee were the sole trustee.

The provisions of this section are effective for trusts created before, on, or after July 1, 2017, except as otherwise directed by the trustor, trust protector, trust advisor, or other fiduciary designated by the terms of the trust.

Source: SL 2017, ch 204, § 12; SL 2019, ch 209, § 4; SL 2021, ch 207, § 8; SL 2023, ch 161, § 6.

CHAPTER 55-1B

DIRECTED TRUSTS

55-1B-1    Definition of terms.

55-1B-1.1    Governing instrument may provide trust advisor or trust protector with powers and immunities of trustee.

55-1B-2    Liability limits of excluded fiduciary--Relief from obligations for excluded fiduciary--Burden of proof in action against excluded fiduciary.

55-1B-3    Death of grantor.

55-1B-4    Trust advisor as fiduciary.

55-1B-5    Excluded fiduciary's liability for loss if trust protector appointed.

55-1B-6    Powers and discretions of trust protector.

55-1B-7    Submission to court jurisdiction--Effect on trust advisor or trust protector.

55-1B-8    Powers of trust protector incorporated by reference in will or trust instrument.

55-1B-9    Investment trust advisor or distribution trust advisor provided for in trust instrument.

55-1B-10    Powers and discretions of investment trust advisor.

55-1B-11    Powers and discretions of distribution trust advisor.

55-1B-12    Powers and discretions of family advisor.

55-1B-1. Definition of terms.

Terms used in this chapter mean:

(1)    "Instrument," any revocable or irrevocable trust document created inter vivos or testamentary or any custodial account agreement whether such document or agreement was created prior to, on, or after July 1, 1997;

(2)    "Trust protector," any person whose appointment as protector is provided for in the instrument. Such person may not be considered to be acting in a fiduciary capacity except to the extent the governing instrument provides otherwise. However, a protector shall be considered acting in a fiduciary capacity to the extent that the person exercises the authority of an investment trust advisor or a distribution trust advisor;

(3)    "Trust advisor," either an investment trust advisor or a distribution trust advisor or, in the case of a custodial account, a custodial account owner or the owner's designee;

(4)    "Fiduciary," a trustee or custodian under any instrument, an executor, administrator, or personal representative of a decedent's estate, or any other party, including a trust advisor, a trust protector, or a trust committee, who is acting in a fiduciary capacity for any person, trust, or estate;

(5)    "Excluded fiduciary," any fiduciary excluded from exercising certain powers under the instrument which powers may be exercised by the grantor, custodial account owner, trust advisor, trust protector, trust committee, or other persons designated in the instrument;

(6)    "Investment trust advisor," a fiduciary, given authority by the instrument to exercise all or any portions of the powers and discretions set forth in § 55-1B-10;

(7)    "Distribution trust advisor," a fiduciary, given authority by the instrument to exercise all or any portions of the powers and discretions set forth in § 55-1B-11;

(8)    "Custodial account," an account, established by a party with a bank as defined in 26 U.S.C. 408(n), as of January 1, 2006, or with another person approved by the Internal Revenue Service as satisfying the requirements to be a nonbank trustee or a nonbank passive trustee set forth in U.S. Treasury Regulations promulgated under 26 U.S.C. 408, that is governed by an instrument concerning the establishment or maintenance, or both, of an individual retirement account, qualified retirement plan, Archer medical savings account, health savings account, Coverdell education savings account, or any similar retirement or savings vehicle permitted under the Internal Revenue Code of 1986, as of January 1, 2006;

(9)    "Custodial account owner," any party who establishes a custodial account; or has the power to designate the beneficiaries or appoint the custodian of the custodial account; or otherwise is the party who possesses the power to direct the investment, disposition, or retention of any assets in the custodial account or name an authorized designee to effect the same;

(10)    "Family advisor," any person whose appointment is provided for in the governing instrument or by court order who is authorized to consult with or advise a fiduciary with regard to fiduciary or nonfiduciary matters and actions, and who may also be authorized by the governing instrument or court order to otherwise act in a nonfiduciary capacity.

Source: SL 1997, ch 280, § 1; SL 2005, ch 260, § 2; SL 2006, ch 248, § 1; SL 2008, ch 257, § 9; SL 2011, ch 212, § 3; SL 2016, ch 231, § 15; SL 2017, ch 204, § 15; SL 2018, ch 275, § 22.

55-1B-1.1. Governing instrument may provide trust advisor or trust protector with powers and immunities of trustee.

Any governing instrument providing for a trust advisor or trust protector may also provide such trust advisor or trust protector with some, none, or all of the rights, powers, privileges, benefits, immunities, or authorities available to a trustee under South Dakota law or under the governing instrument. Unless the governing instrument provides otherwise, a trust advisor or trust protector has no greater liability to any person than would a trustee holding or benefiting from the rights, powers, privileges, benefits, immunities, or authority provided or allowed by the governing instrument to such trust advisor or trust protector.

Source: SL 2011, ch 212, § 4.

55-1B-2. Liability limits of excluded fiduciary--Relief from obligations for excluded fiduciary--Burden of proof in action against excluded fiduciary.

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, 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 or trust protector;

(4)    Any loss that results from relying upon any trust advisor for valuation of trust assets; or

(5)    Any loss that results from any tax filing made or tax position taken based on the recommendations or instructions received from a tax preparer or professional used by the excluded fiduciary at the direction of the grantor or of another trust fiduciary.

Any excluded fiduciary is also relieved from any obligation to independently value trust assets, 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 had authority to direct the acquisition, disposition, or retention of the investment. If the excluded fiduciary offers such communication to the trust advisor, trust protector, or any investment person selected by the investment trust advisor, such action does not 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 or trust protector.

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 or trust protector constitute 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 do not 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 or trust protector.

Nothing in subdivision (2) imposes an obligation or liability with respect to a custodian of a custodial account.

In an action against an excluded fiduciary pursuant to the provisions of this section, the burden to prove the matter by clear and convincing evidence is on the person seeking to hold the excluded fiduciary liable.

Source: SL 1997, ch 280, § 2; SL 2006, ch 248, § 2; SL 2009, ch 252, § 13; SL 2011, ch 212, § 1; SL 2012, ch 233, § 5; SL 2016, ch 231, § 16; SL 2018, ch 275, § 23; SL 2020, ch 206, § 7; SL 2021, ch 207, § 15.

55-1B-3. Death of grantor.

An excluded fiduciary may continue to follow the direction of the trust advisor upon the incapacity or death of the grantor if the instrument so allows.

Source: SL 1997, ch 280, § 3.

55-1B-4. Trust advisor as fiduciary.

If one or more trust advisors are given authority by the terms of a governing instrument to direct, consent to, or disapprove a fiduciary's investment or distribution decisions, or proposed investment or distribution decisions, such trust advisors shall be considered to be fiduciaries when exercising such authority. For investment decisions, so long as there is at least one fiduciary exercising the authority of the investment advisor pursuant to § 55-1B-10 for the investment, except in the cases of willful misconduct or gross negligence by the fiduciary investment advisor in the selection or monitoring of the nonfiduciary trust advisors, the governing instrument may provide that such other trust advisors acting pursuant to this section are not acting in a fiduciary capacity. Similarly, for distribution decisions, so long as there is at least one fiduciary exercising the authority of the distribution advisor pursuant to § 55-1B-11 for the distribution, except in the case of willful misconduct or gross negligence by the fiduciary distribution advisor in the selection or monitoring of the nonfiduciary trust advisors, the governing instrument may provide that such other trust advisors acting pursuant to this section are not acting in a fiduciary capacity.

Source: SL 1997, ch 280, § 4; SL 2018, ch 275, § 24; SL 2021, ch 207, § 9.

55-1B-5. Excluded fiduciary's liability for loss if trust protector appointed.

If an instrument appoints a trust protector, the excluded fiduciary is not liable for any loss resulting from any action taken upon such trust protector's direction.

Source: SL 1997, ch 280, § 5.

55-1B-6. Powers and discretions of trust protector.

The powers and discretions of a trust protector are as provided in the governing instrument and may be exercised or not exercised, in the best interests of the trust, in the sole and absolute discretion of the trust protector and are binding on all other persons. The powers and discretion may include the following:

(1)    Modify or amend the trust instrument to achieve favorable tax status or respond to changes in the Internal Revenue Code, state law, or the rulings and regulations thereunder;

(2)    Increase or decrease the interests of any beneficiaries to the trust;

(3)    Modify the terms of any power of appointment granted by the trust. However, a modification or amendment may not grant a beneficial interest to any individual or class of individuals not specifically provided for under the trust instrument;

(4)    Remove and appoint a trustee, a fiduciary provided for in the governing trust instrument, trust advisor, investment committee member, or distribution committee member;

(5)    Terminate the trust;

(6)    Veto or direct trust distributions;

(7)    Change situs or governing law of the trust, or both;

(8)    Appoint a successor trust protector;

(9)    Interpret terms of the trust instrument at the request of the trustee;

(10)    Advise the trustee on matters concerning a beneficiary;

(11)    Amend or modify the trust instrument to take advantage of laws governing restraints on alienation, distribution of trust property, or the administration of the trust;

(12)    Reserved;

(13)    Add to the trust an individual beneficiary or beneficiaries from a class of individuals identified in the governing instrument;

(14)    Add to the trust a charitable beneficiary or beneficiaries from a class of charities identified in the trust instrument;

(15)    Provide other powers and discretions in the governing instrument;

(16)    Remove a representative as provided in subdivision 55-18-4(3);

(17)    Appoint a representative as provided in subdivision 55-18-9(12); and

(18)    Act as a representative as provided in subdivision 55-18-9(11).

In addition to the powers and discretions granted to the trust protector in the governing instrument, the trust protector may also exercise any of the powers and discretions granted to a trust protector under § 55-2-13 to the extent such exercise is not prohibited under the terms of the governing instrument.

The powers referenced in subdivisions (5), (6), and (11) may be granted notwithstanding the provisions of §§ 55-3-24 to 55-3-28, inclusive.

Source: SL 1997, ch 280, § 6; SL 2005, ch 260, § 3; SL 2009, ch 252, § 14; SL 2013, ch 239, § 20; SL 2016, ch 231, § 17; SL 2017, ch 208, § 29; SL 2020, ch 206, § 8.

55-1B-7. Submission to court jurisdiction--Effect on trust advisor or trust protector.

By accepting an appointment to serve as a trust advisor or trust protector of a trust that is subject to the laws of this State, the trust advisor or the trust protector submits to the jurisdiction of the courts of South Dakota even if investment advisory agreements or other related agreements provide otherwise, and the trust advisor or trust protector may be made a party to any action or proceeding if issues relate to a decision or action of the trust advisor or trust protector.

Source: SL 1997, ch 280, § 7.

55-1B-8. Powers of trust protector incorporated by reference in will or trust instrument.

Any of the powers enumerated in § 55-1B-6, as they exist at the time of the signing of a will by a testator or at the time of the signing of a trust instrument by a trustor, may be, by appropriate reference made thereto, incorporated in whole or in part in such will or trust instrument, by a clearly expressed intention of a testator of a will or trustor of a trust instrument.

Source: SL 2005, ch 260, § 4.

55-1B-9. Investment trust advisor or distribution trust advisor provided for in trust instrument.

A trust instrument governed by the laws of South Dakota may provide for a person to act as an investment trust advisor or a distribution trust advisor, respectively, with regard to investment decisions or discretionary distributions. Unless otherwise provided or restricted by the terms of the governing instrument, any person may simultaneously serve as a trust advisor and a trust protector.

Source: SL 2005, ch 260, § 5; SL 2017, ch 204, § 16.

55-1B-10. Powers and discretions of investment trust advisor.

The powers and discretions of an investment trust advisor shall be as 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. In addition to the powers and discretions granted to the investment trust advisor in the governing instrument, the investment trust advisor may also exercise any of the following powers and discretions to the extent such exercise is not prohibited under the terms of the governing instrument:

(1)    Direct the trustee with respect to the retention, purchase, sale, exchange, tender, or other transaction affecting the ownership thereof or rights therein of trust investments. These powers include the pledge or encumbrance of trust property, lending of trust assets, either secured or unsecured, at terms defined by the investment trust advisor to any party including beneficiaries of the trust 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;

(4)    Direct the trustee with respect to any additional powers and discretions over investment and management of trust assets provided in the governing instrument;

(5)    Direct the trustee as to the value of nonpublicly traded trust investments;

(6)    Direct the trustee as to any investment or management power referenced in chapter 55-1A; and

(7)    Exercise the powers granted to an investment trust advisor in § 55-2-13.

Source: SL 2005, ch 260, § 6; SL 2012, ch 233, § 6; SL 2014, ch 226, § 17; SL 2020, ch 206, § 9.

55-1B-11. Powers and discretions of distribution trust advisor.

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 governing instrument provide otherwise, then, in addition to the powers and discretions granted to the distribution trust advisor in the trust instrument, the distribution trust advisor shall direct the trustee with regard to all discretionary distributions to beneficiaries, may direct appointments pursuant to § 55-2-15, and may exercise any of the powers and discretions granted to a distribution trust advisor in § 55-2-13.

Source: SL 2005, ch 260, § 7; SL 2009, ch 252, § 15; SL 2011, ch 212, § 5; SL 2012, ch 233, § 7; SL 2020, ch 206, § 10.

55-1B-12. Powers and discretions of family advisor.

The powers and discretions of a family advisor are as provided in the governing instrument or by court order and may be exercised or not exercised, in the best interests of the trust, in the sole and absolute discretion of the family advisor. The powers and discretions may only include the following:

(1)    Remove and appoint a trustee, a fiduciary provided for in the governing trust instrument, trust advisor, investment committee member, or distribution committee member;

(2)    Appoint a trust protector, or a family advisor;

(3)    Advise the trustee on matters concerning any beneficiary; receive trust accountings, investment reports, and other information from the trustee or to which a beneficiary is entitled; attend meetings whether in person or by any other means with the trustee, investment trust advisors, distribution trust advisors, or other advisors whether in person or by any means, electronic or otherwise; and to consult with a fiduciary regarding both fiduciary and nonfiduciary matters or actions, all without any power or discretion to take any action as a fiduciary; or

(4)    Provide direction regarding notification of qualified beneficiaries pursuant to § 55-2-13.

A family advisor is not required to exercise any powers or discretions under any circumstances. Every action or inaction by a family advisor is a nonfiduciary action or inaction and a family advisor is absolutely excluded from liability to any other person for an action or inaction as a family advisor. A court may review a family advisor's exercise of the powers described in subdivisions (1), (2), and (4) only if the family advisor acts dishonestly or with an improper motive but may not review a family advisor's failure to exercise any powers. A reasonableness standard may not be applied to any action or inaction of a family advisor. Other than for the two circumstances listed above, a court has no jurisdiction to review a family advisor's action or inaction.

A family advisor is entitled to compensation as provided in the governing instrument. If the governing instrument does not provide for or establish compensation, a family advisor is entitled to reasonable compensation for the exercise of the powers and discretions granted to the family advisor pursuant to this chapter.

Source: SL 2016, ch 231, § 18; SL 2020, ch 206, § 11.

CHAPTER 55-2

DUTIES AND LIABILITIES OF TRUSTEES

55-2-1    Trustee's obligation of good faith.

55-2-2    Trustee not to use property for his own benefit--Profit of trustee from use of property, extent of liability.

55-2-3    Transactions involving interest of trustee adverse to beneficiary prohibited--Exceptions.

55-2-4    Trustee's influence not to be used for his advantage.

55-2-5    Trustee not to assume a trust adverse to the interest of beneficiary.

55-2-6    Adverse interest of trustee--Information to beneficiary--Removal of trustee.

55-2-7    Fraud against beneficiary of trust.

55-2-8    Presumption against trustee.

55-2-9    Liability of trustee mingling trust property with his own.

55-2-10    Measure of liability for unauthorized use or disposal of trust property--Intent to serve interest of beneficiary.

55-2-11    Liability for acts of cotrustee.

55-2-12    Liability and duties of successor trustee for agreements, contracts or actions of predecessor fiduciary.

55-2-13    Notice to qualified beneficiaries of existence of trust--Written directions--Variation of right of a beneficiary to be informed--Confidentiality of trust information.

55-2-13.1    Information to be provided to excluded fiduciaries--Liability limits of trustee.

55-2-14    Duty to provide information regarding revocable trust and its administration.

55-2-15    Trustee authorized to distribute income or principal from first trust may appoint all or part in favor of trustee of second trust--Restrictions--Power of appointment to beneficiary of second trust.

55-2-16    Action that may not be taken by restricted trustee may be taken by another unrestricted trustee.

55-2-17    Conditions under which beneficiary has power to change trustees.

55-2-18    Exercise of power to distribute income or principal by written instrument--Notice to beneficiaries of first trust.

55-2-19    Exercise of power to distribute income or principal considered exercise of power of appointment.

55-2-20    Impermissible use of power.

55-2-21    Trustee's right to distribute income or principal in trust arising under law or terms of first trust not abridged.

55-2-22    Fiduciary duty to determine that substituted property is of equivalent value.

55-2-23    Reliance of excluded fiduciaries and trustees on tax information.

55-2-24    Notice to beneficiaries and other interested parties.

55-2-1. Trustee's obligation of good faith.

In all matters connected with his trust a trustee is bound to act in the highest good faith toward his beneficiary and may not obtain any advantage therein over the latter by the slightest misrepresentation, concealment, threat, or adverse pressure of any kind.

Source: SDC 1939, § 59.0106.

55-2-2. Trustee not to use property for his own benefit--Profit of trustee from use of property, extent of liability.

A trustee may not in any manner use or deal with the trust property for his own profit or for any other purpose unconnected with the trust.

If he does so, he may, at the option of the beneficiary, be required to account for all profits thereby made or to pay the value of the use of the trust property, and if he has disposed thereof, to replace it with its fruits or to account for its proceeds with interest.

Source: SDC 1939, § 59.0107.

55-2-3. Transactions involving interest of trustee adverse to beneficiary prohibited--Exceptions.

Neither a trustee nor any of his agents may take part in any transaction concerning the trust in which he or anyone for whom he acts as agent has an interest, present or contingent, adverse to that of his beneficiary, except as follows:

(1)    When the beneficiary does have the capacity to contract and, with a full knowledge of the motives of the trustee and of all other facts concerning the transaction which might affect his own decision and without the use of any influence on the part of the trustee, permits the trustee to do so;

(2)    When the beneficiary does not have the capacity to contract but the circuit court, upon the like information of the facts, grants the like permission;

(3)    When some of the beneficiaries have the capacity to contract and some do not have it and the former grant permission for themselves and the circuit court for the latter in the manner above prescribed; or

(4)    When the instrument creating the trust expressly grants permission to the trustee to buy, sell or lease property for the trust from or to the trust.

Source: SDC 1939, § 59.0108; SL 1981, ch 354, § 1.

55-2-4. Trustee's influence not to be used for his advantage.

A trustee may not use the influence which his position gives him to obtain any advantage from his beneficiary.

Source: SDC 1939, § 59.0109.

55-2-5. Trustee not to assume a trust adverse to the interest of beneficiary.

No trustee so long as he remains in the trust may undertake another trust adverse in its nature to the interest of his beneficiary in the subject of the trust without the consent of the latter.

Source: SDC 1939, § 59.0110.

55-2-6. Adverse interest of trustee--Information to beneficiary--Removal of trustee.

If a trustee acquires any interest or becomes charged with any duty adverse to the interest of his beneficiary in the subject of the trust, he must immediately inform the latter thereof and may be at once removed.

Source: SDC 1939, § 59.0111.

55-2-7. Fraud against beneficiary of trust.

Every violation of the provisions of §§ 55-2-1 to 55-2-6, inclusive, is a fraud against the beneficiary of the trust.

Source: SDC 1939, § 59.0112.

55-2-8. Presumption against trustee.

All transactions between a trustee and his beneficiary during the existence of the trust or while the influence acquired by the trustee remains, by which he obtains any advantage from his beneficiary, are presumed to be entered into by the latter without sufficient consideration and under undue influence.

Source: SDC 1939, § 59.0113.

55-2-9. Liability of trustee mingling trust property with his own.

A trustee who willfully and unnecessarily mingles the trust property with his own so as to constitute himself in appearance its absolute owner is liable for its safety in all events.

Source: SDC 1939, § 59.0114.

55-2-10. Measure of liability for unauthorized use or disposal of trust property--Intent to serve interest of beneficiary.

A trustee who uses or disposes of the trust property in any manner not authorized by the trust but in good faith and with intent to serve the interest of the beneficiary is liable only to make good whatever is lost to the beneficiary by his error.

Source: SDC 1939, § 59.0115.

55-2-11. Liability for acts of cotrustee.

A trustee is responsible for the wrongful acts of a cotrustee to which he consented or which by his negligence he enabled the latter to commit, but for no others.

Source: SDC 1939, § 59.0116.

55-2-12. Liability and duties of successor trustee for agreements, contracts or actions of predecessor fiduciary.

Unless otherwise provided in the trust agreement, a successor trustee:

(1)    Is not individually liable for actions or inactions of a predecessor fiduciary, including agreements, contracts accountings, records, distributions, investments, modifications, reformations, or other acts entered into by its predecessor fiduciary; and

(2)    Does not have a duty to:

(a)    Confirm or validate such predecessor fiduciary's actions or inactions;

(b)    Confirm the validity of the trust agreement; or

(c)    Prosecute or seek redress for any action or inaction by the predecessor fiduciary.

Source: SL 1991, ch 229, § 2; SL 2021, ch 207, § 10.

55-2-13. Notice to qualified beneficiaries of existence of trust--Written directions--Variation of right of a beneficiary to be informed--Confidentiality of trust information.

(1)    Except as otherwise provided by the terms of a trust instrument governing a revocable trust and subject to § 55-2-14, a trustee has no duty to notify the qualified beneficiaries of the trust's existence.

(2)    Except as otherwise provided by the terms of a trust instrument governing an irrevocable trust or otherwise directed in writing by the trustor, trust advisor, or trust protector, the trustee shall:

(a)    Notify the qualified beneficiaries of the trust's existence and of the right of the qualified beneficiary to request a copy of the trust instrument pertaining to the qualified beneficiary's interest in the trust within sixty days after the trustee has accepted trusteeship of the trust, or within sixty days after the date the trustee acquires knowledge that a formerly revocable trust has become irrevocable;

(b)    Promptly furnish to the qualified beneficiary a copy of the trust instrument upon request by the qualified beneficiary; and

(c)    Promptly respond to a qualified beneficiary's request for information related to the administration of the trust, unless the request is unreasonable under the circumstances.

(3)    The trustor, trust advisor, or trust protector, may, by the terms of the governing instrument, or by providing written directions to the trustee, expand, restrict, eliminate, or otherwise modify the rights of beneficiaries to information relating to a trust. Unless otherwise stated in the governing instrument, the direction of the trustor controls in the event of a conflict among written directions provided to the trustee pursuant to this section. The trustee incurs no liability for a loss or otherwise for relying upon the written directions, including an instance when the governing instrument of an irrevocable trust does not expressly authorize an expansion, restriction, or other modification of the rights of beneficiaries to information relating to a trust.

The terms of a trust instrument governing an irrevocable trust or written directions provided pursuant to this section may expand, restrict, eliminate, or otherwise vary the right of a beneficiary to be informed of the beneficiary's interest in a trust indefinitely or for a period of time, for example:

(a)    A period of time related to the age of a beneficiary;

(b)    A period of time related to the lifetime of either a trustor or spouse of a trustor, or both;

(c)    A period of time related to a term of years or specific date; and

(d)    A period of time related to a specific event that is certain to occur.

(4)    The terms of the governing instrument or written directions provided pursuant to this section may authorize either the trustor, trust advisor, or trust protector to appoint a representative as provided in subdivisions 55-18-9(11) and (12) for the purpose of being informed, on behalf of the beneficiary, of the beneficiary's interest in a trust for the period of time that the right of a beneficiary to be informed about a beneficiary's interest is restricted or eliminated pursuant to this section.

(5)    The written directions of the trustor, whether made in the governing instrument or by separate written directions made pursuant to the governing instrument or this section, control and remain in effect upon the death of the trustor until or unless modified or revoked by a trust advisor or trust protector as permitted by the governing instrument or the trustor's written directions in effect at the time of the trustor's death. Subject to subsection (3), the written directions of a trust advisor or trust protector remain in effect until or unless a trust advisor or trust protector revokes the written directions by providing a writing to that effect to the trustee.

(6)    Any beneficiary may waive the right to the notice or information otherwise required to be furnished under this section and, with respect to future reports and other information, may withdraw a waiver previously given.

(7)    Before providing information to any qualified beneficiary, a fiduciary may require that any such qualified beneficiary or beneficiaries be bound by the same duty of confidentiality that binds the fiduciary. If trust information is sought through service of a subpoena on a fiduciary, the fiduciary may petition the court for an order that makes disclosure of trust information contingent upon the receiving party being bound by reasonable conditions to ensure the protection of confidentiality of trust information by the receiving party.

(8)    The change in the identity of a trustee, occurring as the result of a mere name change or a merger, consolidation, combination, or reorganization of a trustee, does not require notice.

(9)    For the purposes of this section, the term, qualified beneficiary, means a beneficiary that is an entity then in existence or an individual who is twenty-one years of age or older and who, on the date the beneficiary's qualification is determined:

(a)    Is a distributee or permissible distributee of trust income or principal;

(b)    Would be a distributee or permissible distributee of trust income or principal if the interests of the distributees terminated on that date; or

(c)    Would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date.

However, if the distributee is then unknown because a person holds a power to change the distributee, the trustee shall give notice only to the holder of the power.

(10)    For purposes of this section, the term, trust advisor, and the term, trust protector, are defined as provided in § 55-1B-1.

(11)    The provisions of this section are effective for trusts created, amended, or restated after June 30, 2002, except as otherwise directed by the trustor, trust protector, trust advisor, or other fiduciary designated by the terms of the trust. For trusts created before July 1, 2002, a trustee has no duty at common law or otherwise to notify a qualified beneficiary of the trust's existence unless otherwise directed by the trustor. The provisions of this paragraph do not apply if otherwise directed by the trustor, trust protector, trust advisor, or other fiduciary designated by the terms of the trust.

Source: SL 2002, ch 100, § 15; SL 2007, ch 247, § 8; SL 2008, ch 257, § 10; SL 2009, ch 252, § 16; SL 2010, ch 232, § 1; SL 2011, ch 212, § 8; SL 2017, ch 204, § 17; SL 2017, ch 208, § 30; SL 2018, ch 275, § 25; SL 2020, ch 206, § 12; SL 2023, ch 161, § 7.

55-2-13.1. Information to be provided to excluded fiduciaries--Liability limits of trustee.

A trust advisor, trust protector, or other fiduciary designated by the terms of the trust shall keep each excluded fiduciary designated by the terms of the trust reasonably informed about:

(1)    The administration of the trust with respect to any specific duty or function being performed by the trust advisor, trust protector, or other fiduciary to the extent that the duty or function would normally be performed by the excluded fiduciary or to the extent that providing such information to the excluded fiduciary is reasonably necessary for the excluded fiduciary to perform its duties; and

(2)    Any other material information that the excluded fiduciary would be required to disclose to the qualified beneficiaries, regardless of whether the terms of the trust relieve the excluded fiduciary from providing such information to the qualified beneficiaries pursuant to § 55-2-13.

The limitation of the liability of the excluded fiduciary is not affected by the performance of the actions required above or the failure of a trust advisor, trust protector, or other fiduciary designated pursuant to the terms of the governing instrument, to perform any such actions.

Source: SL 2023, ch 161, § 8.

55-2-14. Duty to provide information regarding revocable trust and its administration.

A trustee of a revocable trust:

(1)    Subject to subdivision 3 below, shall keep the settlor reasonably informed of the trust and its administration;

(2)    Unless otherwise provided in the trust instrument, does not have a duty to inform a trust beneficiary of the trust and its administration, other than the settlor or, if the trustor is an incapacitated person, the trustor's designated agent;

(3)    Unless otherwise provided in the trust instrument, if the trustee obtains actual knowledge that the settlor of a revocable trust is an incapacitated person and has no designated agent, the trustee may in its sole discretion keep each interested trust beneficiary, who, if the settlor were then deceased, would be a current trust beneficiary, reasonably informed of the trust and its administration. Notwithstanding the provisions of the trust instrument, upon good cause shown, the court may order the trustee to keep other beneficiaries reasonably informed of the trust and its administration.

Source: SL 2007, ch 247, § 9.

55-2-15. Trustee authorized to distribute income or principal from first trust may appoint all or part in favor of trustee of second trust--Restrictions--Power of appointment to beneficiary of second trust.

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, independently or with court approval, may 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; or

(c)    Both (a) and (b);

(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, or to a trust established pursuant to 42 U.S.C. § 1396(p)(d)(4);

(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 or unitrust 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, the 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.

Furthermore, notwithstanding the provisions of this section or § 55-2-18 or 55-2-19, a trustee may also exercise the power described in those sections by modifying the first trust without an actual distribution of property, in which case the second trust is the modified first trust. In exercising the power described by the preceding sentence of this section, a trustee shall notify all beneficiaries of the trust, in writing applying chapter 55-18, at least twenty days prior to the effective date of the trustee's exercise of the power.

This section applies to any trust administered under the laws of this state, including a trust whose governing jurisdiction is transferred to this state.

Source: SL 2007, ch 281, § 1; SL 2008, ch 257, § 11; SL 2009, ch 252, § 17; SL 2011, ch 212, § 10; SL 2012, ch 233, § 4; SL 2013, ch 239, § 16; SL 2017, ch 204, § 18; SL 2021, ch 207, § 4.

55-2-16. Action that may not be taken by restricted trustee may be taken by another unrestricted trustee.

Any action that may not be taken by a trustee of the first trust by reason of the restrictions in subdivision 55-2-15(2) may instead be taken by any other trustee of the first trust who is not so restricted, or, if none, by the next available party who can be a successor trustee and who is not so restricted. The second trust may be a trust created or administered under the laws of any jurisdiction, within or without the United States.

Source: SL 2007, ch 281, § 2.

55-2-17. Conditions under which beneficiary has power to change trustees.

For the purposes of § 55-2-15, a beneficiary shall be considered to have the power to "change the trustees" if he or she can, alone or with others, name himself or herself as a trustee or can remove a trustee and replace that trustee with a new trustee who is the beneficiary or who is related or subordinate (as defined in § 672 of the I.R.C.) to the beneficiary.

Source: SL 2007, ch 281, § 3; SL 2009, ch 252, § 18.

55-2-18. Exercise of power to distribute income or principal by written instrument--Notice to beneficiaries of first trust.

The exercise of the power to distribute the income or principal of the trust under § 55-2-15 shall be by an instrument in writing, signed and acknowledged by the trustee and filed with the records of the trust. The trustee of the first trust may notify the beneficiaries of the first trust, in writing, prior to the effective date of the trustee's exercise of the power under § 55-2-15 (applying chapter 55-18). A copy of the exercise of this authority and the second trust agreement shall satisfy this notice provision. For the purposes of this section, the term, beneficiaries, means those persons who would be entitled to notice and a copy of the first trust instrument under § 55-2-13.

Source: SL 2007, ch 281, § 4; SL 2009, ch 252, § 19; SL 2013, ch 239, § 17; SL 2017, ch 208, § 31.

55-2-19. Exercise of power to distribute income or principal considered exercise of power of appointment.

The exercise of the power to distribute the income or principal of the trust under § 55-2-15 shall be considered the exercise of a power of appointment (other than a power to appoint to the trustee, the trustee's creditors, the trustee's estate, or the creditors of the trustee's estate).

Source: SL 2007, ch 281, § 5.

55-2-20. Impermissible use of power.

The power under § 55-2-15 may not be exercised to suspend the power to alienate trust property or extend the first trust beyond the permissible period of any rule against perpetuities applicable to the first trust.

Source: SL 2007, ch 281, § 6; SL 2011, ch 212, § 9.

55-2-21. Trustee's right to distribute income or principal in trust arising under law or terms of first trust not abridged.

No provision of §§ 55-2-15 to 55-2-20, inclusive, may be construed to abridge the right of any trustee who has power to distribute income or principal in further trust which arises under statute, common law, or the terms of the first trust.

Source: SL 2007, ch 281, § 7; SL 2009, ch 252, § 20.

55-2-22. Fiduciary duty to determine that substituted property is of equivalent value.

Notwithstanding the terms of a trust instrument, if a settlor has a power to substitute property of equivalent value, a trustee has a fiduciary duty to determine that the substituted property is of equivalent value, prior to allowing the substitution.

Source: SL 2009, ch 252, § 21.

55-2-23. Reliance of excluded fiduciaries and trustees on tax information.

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.

Source: SL 2012, ch 233, § 21.

55-2-24. Notice to beneficiaries and other interested parties.

Except as otherwise provided by chapter 21-22, § 55-4-58, or by the terms of a governing instrument, and in addition to the methods of notice allowed or mandated by title 15, notice to beneficiaries and other persons interested in a trust pursuant to § 55-2-13 or otherwise may be carried out by means of any of the following methods:

(1)    By delivery to the person, to the person's last known address, or to an address supplied by the person;

(2)    By U.S. mail, postage prepaid, addressed to the person at the person's last known address, or to an address supplied by the person;

(3)    By facsimile to a facsimile number of such person;

(4)    By electronic communication, as defined by subdivision 55-19-1(12); or

(5)    By posting on or sending to an electronic network or site accessible via the internet, mobile application, computer, mobile device, tablet, or any other electronic device, together with separate notice of the posting provided to the person in conformity with subdivisions (1), (2), (3), or (4) of this section.

Source: SL 2023, ch 161, § 9.

CHAPTER 55-3

EXPRESS TRUSTS FOR THIRD-PARTY BENEFICIARIES

55-3-1    Application of chapter.

55-3-2    Creation of trust--Mutual consent of trustor and trustee.

55-3-3    Appointing court or public officer as trustor.

55-3-4    Declaration of trust--Declarations of trustor to trustee before acceptance.

55-3-5    Trustee to follow declaration of trust--Modifications.

55-3-6    Trust irrevocable in absence of express contrary provisions.

55-3-7    Trustee's power as agent.

55-3-8    55-3-8. Repealed by SL 1993, ch 355, § 3

55-3-9    55-3-9. Repealed by SL 2007, ch 280, § 25.

55-3-10    Degree of care and diligence used in execution of trusts.

55-3-11    Investment of money by trustee--Interest, simple or compound, on omission to invest trust moneys.

55-3-12    Purchase by trustee of claims against trust property.

55-3-13    Expenses incurred by trustee in performance of trust--Reimbursement.

55-3-14    Compensation of trustee.

55-3-15    Implied trustee--No rights to compensation or repayment of expenses.

55-3-16    Vacation of office of trustee.

55-3-17    Discharge of trustee--Grounds.

55-3-17.1    Resignation of fiduciary.

55-3-18    Survivorship between cotrustees.

55-3-19    Discharge of trustee before trust executed--Duty to secure appointment of successor.

55-3-20    Removal of trustee by circuit court--Vacant trusteeship filled by court.

55-3-20.1    Grounds for removal of trustee.

55-3-21    Appointment of trustee by circuit court--Grounds.

55-3-22    55-3-22. Repealed by SL 1998, ch 282, § 10

55-3-23    Termination of trust.

55-3-24    Modification or termination of trust--Notice to fiduciaries--Distribution of property.

55-3-25    Petition to court for affirmation--Non-consenting beneficiaries--Distribution of property.

55-3-26    Petition to modify terms of trust--Circumstances--Distribution of property.

55-3-27    Termination of noncharitable trusts valued under one hundred fifty thousand dollars--Distribution of property.

55-3-28    Terms of trust may be reformed by court.

55-3-29    Trustee may combine or divide trusts--Rights of beneficiaries--Trust purposes--Petition to court.

55-3-29.1    Defense of laches not available.

55-3-29.2    Statute of limitations defense not available.

55-3-30    Provisions not exclusive.

55-3-31    55-3-31 to 55-3-38. Repealed by SL 2017, ch 208, § 36.

55-3-39    When state law or jurisdiction provision valid, effective, and conclusive.

55-3-40    Validity, construction, and administration of trust with state jurisdiction provision.

55-3-41    Qualified person defined.

55-3-42    State jurisdiction provision defined.

55-3-43    South Dakota investments defined.

55-3-44    Trustor defined.

55-3-45    Beneficiary approval of trustee's accounting--Alternative approval of trustee's accounting--Accounting defined.

55-3-46    Effect of the laws, rules, or orders of foreign country on trust or disposition of property.

55-3-46.1    Effect of laws, rules, or orders of other states on a trust or disposition of property.

55-3-47    Cessation of trustee upon action of foreign court--Successor trustee.

55-3-48    South Dakota law governs administration of trust.

55-3-49    Enforcement of foreign judgments.

55-3-1. Application of chapter.

The provisions of this chapter apply to all trusts.

Source: SDC 1939, § 59.0201; SL 1993, ch 213, § 254; SL 1993, ch 355, § 1; SL 1998, ch 282, § 11; SL 2010, ch 232, § 2.

55-3-2. Creation of trust--Mutual consent of trustor and trustee.

The mutual consent of a trustor and trustee creates a trust of which the beneficiary may take advantage at any time prior to its rescission.

Source: SDC 1939, § 59.0202.

55-3-3. Appointing court or public officer as trustor.

When a trustee is appointed by a court or public officer as a trustee, the court or officer is the trustor. A court may otherwise establish or create a trust and may act as the trustor of a trust.

Source: SDC 1939, § 59.0202; SL 2016, ch 231, § 19.

55-3-4. Declaration of trust--Declarations of trustor to trustee before acceptance.

The nature, extent, and object of a trust are expressed in the declaration of trust.

All declarations of a trustor to his trustees in relation to the trust, before its acceptance by the trustees or any of them are to be deemed part of the declaration of the trust, except that when a declaration of trust is made in writing all previous declarations by the same trustor are merged therein.

Source: SDC 1939, § 59.0203.

55-3-5. Trustee to follow declaration of trust--Modifications.

A trustee shall fulfill the purposes of the trust as declared at its creation, or as subsequently amended, and shall follow all the directions of the trustor given at that time, except as modified. For purposes of modifications by consent of all parties interested and modifications upon approval by the court, the provisions of chapter 55-18 apply to such modifications.

Source: SDC 1939, § 59.0204; SL 1993, ch 355, § 5; SL 2017, ch 208, § 32; SL 2021, ch 207, § 2.

55-3-6. Trust irrevocable in absence of express contrary provisions.

Unless the terms of a trust expressly reserve a power to the settlor to revoke or modify a trust, a trust shall be irrevocable.

Source: SDC 1939, § 59.0216; SL 1993, ch 355, § 2; SL 1998, ch 282, § 9; SL 2019, ch 209, § 5.

55-3-7. Trustee's power as agent.

A trustee is a general agent for the trust and the trust property. The trustee's authority is the authority that is conferred upon the trustee by the declaration of trust and by this chapter and none other. The trustee's acts, within the scope of the trustee's authority, bind the trust and the trust property to the same extent as the acts of an agent bind the agent's principal.

Source: SDC 1939, § 59.0209; SL 2016, ch 231, § 20.