Probate & Trust Law Section Conference Manual ... - Minnesota CLE

ii. Location of Trust Protector, Distribution Committee, and Investment Committee;
best if not in grantor’s resident state. Consider a Special Purpose Entity for
added contact with DAPT state if located in grantor’s resident state;
iii. Please note, in regard to private trust companies (PTC), if the PTC is in a DAPT
state, but administers a DAPT in another state, there may be some issues for the
DAPT;
c. Location of the trust property;
i. In addition to the trust, it may be better to hold the trust property in an LLC in the
DAPT state;
ii. For situs purposes, generally best if grantor does not use an LLC or LP in the
grantor’s resident state;
d. Residence of the grantor;
e. Residence of the beneficiaries; and
f. Other relevant factors depending on circumstances. 201
A similar list of factors was used by the Kansas Appellate Court in Commerce Bank v. Bolander
and Whittet, 2007 WL 1041760 (Kann. App. 2007) to determine the most the “significant
relationship” for the purpose of a conflict of laws analysis.
Please note factors 4 and 5 usually cannot be changed. Similarly, factors 1 and 2 can easily be
tied to the DAPT state. If the trust property is titled to an LLC in the DAPT state, factor 3 can
also be met. This would further tie the trust to the DAPT state. Please note these are just
informational guidelines.
4. THREE KEY GENERAL REQUIREMENTS 202
Generally the requirements for a DAPT:
No pre-existing understanding or arrangement between the settlor and the trustee;
Creditors of settlor are unable to access trust property interests as defined by state law;
and
The assets were not transferred fraudulently.
5. DISCRETIONARY SUPPORT STATUTE
South Dakota was the first state in the U.S. with a “Discretionary Support Statute.” 203 According
to many advisors, the Restatement (Third) of Trusts may have blurred the line, allowing for a
fully discretionary trust to possibly be attached by a beneficiary’s creditors as a property interest.
South Dakota was the first state to codify the common law and Restatement (Second), which
defines the types of interests a beneficiary has in a trust and therefore the rights of a beneficiary’s
creditors. 204 Consequently, a discretionary interest in a trust is not a property interest in South
Dakota. 205 Additionally, limited powers of appointment and remainder interests are also not
201 Commerce Bank v. Bolander and Whittet, 2007 WL 1041760 (Kann. App. 2007).
202 See SOUTH DAKOTA CODIFIED LAWS §§ 55-16-1 to -16.
203 SOUTH DAKOTA CODIFIED LAWS § 55-1-43.
204 SOUTH DAKOTA CODIFIED LAWS § 55-1-43.
SOUTH DAKOTA CODIFIED LAWS § 55-1-43.
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