Terry N. Prendergast

Sioux Falls trust company lawyer Terry Prendergast at Davenport, Evans, Hurwitz & Smith Law Firm in Sioux Falls, SD. Full transcript available at YouTube.com:

Hello. I’m Terry Prendergast, a financial services lawyer with the Davenport Evans Law Firm in Sioux Falls, South Dakota. Much of my practice focuses on the formation and ongoing operation of public and private trust companies and migrating foreign trusts to South Dakota. Today I’m going to discuss some of the types of trust companies formed in South Dakota.

South Dakota has nearly 100 trust licensed chartered non-depository trust companies. They have more than $300 billion of assets under management or custody, making South Dakota the top jurisdiction in the country. The variety and reasons for South Dakota trust companies vary but all desire South Dakota as a jurisdiction because of our strong trust laws, lack of taxation, and strong economic climate. Private trust companies only serve a family, usually with a common ancestor. Families many times form South Dakota trust companies for operational efficiency, tax efficiency, and trust continuity. Other reasons are family privacy, better responsiveness to family concerns, and cost savings. Also, families may be concerned with management and investment of wealth in a manner consistent with the family’s philosophy, techniques, and concerns. There are currently over 30 private trust companies in South Dakota, and our firm has worked with almost 85% of them.

Public trust companies, rather than serving a private family, hold themselves out to the public in general. There are many categories of public trust companies, and again our firm has worked with most of them, working with over 50 of the approximately 60. The traditional trust company from 40 years ago had a trustee that served all fiduciary functions, including investment decisions, distribution decisions, recordkeeping and custody. The modern trust laws separating out directed trustees allow for grantors to hire administrative trustees for the recordkeeping and custody, but have trust protectors, investment advisors, and distribution advisors make the decisions which traditionally were all made by the trustees. This can save the client money, since the administrative trustees do not charge for, and are not liable for, investment or distribution decisions. So the first category of these state non-depository public trust companies that started forming were the administrative trustees following this directed trustee model.

Starting in 2006, and following on this model, the self directed IRA custodian trust companies began expanding in South Dakota. These trust companies allowed IRA owners (just as advisors in directed trusts) to direct investments in their IRAs and 401 (k)s while the trustee served a custodian role. From the first public trust company in this area in 2006, South Dakota now has eleven trust companies in the IRA area and another few in the other retirement plan area, making it the state with the most such companies in the nation and our firm has assisted all of them.

Other categories of public trust companies which we have assisted in forming include those for registered investment advisors and multi family offices, who wanted to give their clients trust alternatives in a strong trust law, no tax state, and those trust companies catering to foreign or international clients. The United States and South Dakota, with its strong judicial system, fiscally sound state government, strong privacy laws and no state tax have become a place where foreign individuals of wealth are interested in situsing their trust companies. Our firm has worked with most of these international client trust companies. The final and newest category of trust companies are those based on new technology, cryptocurrency or blockchain. This will continue the evolution of trust companies in South Dakota and our firm continues to lead the way working with such companies.

We can provide assistance at any stage in the application process or ongoing services to trust companies. Please feel free to contact me or one of our other trust company attorneys for assistance, at 605-336-2880 or visit dehs.com to reach a Davenport Evans lawyer.