South Dakota Trust Law Changes for 2025–2026

South Dakota trust law changed in both 2025 and 2026. The practical updates affect directed-trust offices, decanting, grantor income-tax reimbursement, special spousal trusts, and access to sealed court records. The 2026 provisions discussed here took effect July 1, 2026, so they should be treated as effective law rather than proposals.

This update was checked against official sources through July 19, 2026. A transaction after that date still requires a fresh review of the current codified section, enactment history, effective-date language, court decisions, and relevant federal law.

How to read this legislative update

The source set includes current SDCL Title 55, 2025 Session Laws chapter 196 (Senate Bill 69), 2026 Session Laws chapter 198 (Senate Bill 100), and South Dakota Supreme Court Rule 26-06. Those materials serve different purposes. A session law shows enacted changes and effective provisions; the codified statute shows the current integrated text.

Status must be precise. Introduction, legislative passage, enrollment, enactment, and effective operation are not synonyms. This page covers provisions that were enacted and, as of the review date, effective.

Implementation is section-specific. An act may replace only selected words or subsections, and its application clause can distinguish trusts by creation date, move date, administration, or action date. For any live matter, compare the former language, new language, and transition rule against the trust’s actual timeline.

2025: South Dakota recognizes a tax trust adviser

Chapter 196 added the tax trust adviser to South Dakota’s recognized directed-trust offices. Read the current definitions in § 55-1B-1 with §§ 55-1B-9 and 55-1B-13. An instrument can allocate specified tax powers to the office, and the statutory provisions concerning status and jurisdiction apply according to their terms.

The enactment did not appoint a tax adviser in every existing trust. A trust seeking to use the role needs instrument authority, a valid appointment, acceptance, identified powers, and an operating process. If the present document lacks that authority, amendment, protector action, decanting, or another valid modification route may be required.

The drafting and administration file should answer who controls elections, tax character, reimbursements, divisions, allocations, settlements, and filing positions. It should also state whether the adviser acts as a fiduciary for the assigned power, who supplies data, when a direction is due, who executes returns, and where the instruction is preserved.

2025: directed-trust agreements require coordination

The same act amended related provisions in chapter 55-1B. Existing responsibility charts and service contracts should be tested against current §§ 55-1B-2, 55-1B-4, and 55-1B-9 through 55-1B-13. A statute and a provider agreement can evolve on different schedules, leaving a gap between legal allocation and operating practice.

An “excluded fiduciary” description should remain function-specific. The amendment does not remove all responsibility from an administrative trustee across every trust activity. Update forms so each investment, tax, distribution, and family decision identifies the authorized actor, required consent, implementing office, and record owner.

Beneficiary explanations deserve the same precision. They should show whom to contact for a request and avoid implying that the administrative trustee controls an authority assigned elsewhere.

2025: § 55-2-15 decanting revisions

Chapter 196 also revised South Dakota’s statute for appointment to another trust and first-trust modification. Section 55-2-15 contains different powers, standards, protections, and notice mechanics based on the trustee’s discretion and the form of exercise.

For a post-amendment transaction, identify the controlling subsection in the codified law. Preserve the trustee’s conclusion that the action is necessary or desirable, the analysis of trust purposes and resulting terms, beneficiary procedures, tax attributes, and external asset-transfer work.

Do not recycle an old decanting memorandum without a text comparison. The current analysis still must protect applicable beneficiary classes, withdrawal rights, fixed interests, marital and charitable deductions, grantor-retained-annuity interests, and other tax-sensitive provisions.

2026: discretionary grantor income-tax reimbursement

Chapter 198 created SDCL § 55-1-36.2 effective July 1, 2026. Unless the trust expressly prohibits reimbursement, the provision permits a trustee—other than the grantor or a related or subordinate party within the incorporated federal reference—to reimburse the grantor for income-tax liability attributable to trust income in the trustee’s sole discretion.

Payment may instead be made to the taxing authority. The statute prohibits reimbursement from a life-insurance policy on the grantor, the policy’s cash value, or policy-loan proceeds. It also states that holding or exercising this authority does not make the grantor a beneficiary for purposes of South Dakota creditor law.

The session law limits application to a trust created in South Dakota or moved into South Dakota administration on or after July 1, 2026. A trust outside that language needs an independent source of authority rather than an assumption that the new default applies.

This is permission, not a promise of payment or federal tax treatment. Before exercising it, review the instrument, 26 U.S.C. §§ 671–679, possible estate-inclusion issues, liquidity, fiduciary purpose, insurance restrictions, and the law of any other state with a plausible connection.

2026: a second round of § 55-2-15 changes

Chapter 198 amended § 55-2-15 again. A decanting or first-trust modification completed on or after July 1, 2026 should be reviewed under the post-2026 codified text, not solely against the 2025 enactment.

The changes operate within the section’s definitions, trustee standard, limits on beneficial changes, tax protections, and notice rules. Update internal checklists, form notices, resolutions, and opinion templates accordingly.

A transaction begun before July 1 but completed afterward raises a transition question. Identify which law applies to notice, fiduciary action, execution, and effective transfer, and determine whether a refreshed notice or consent process is appropriate.

2026: special spousal trust language

Chapter 198 amended § 55-17-5, which concerns the relationship between a South Dakota special spousal trust and 26 U.S.C. § 1014(b)(6). The state provision now declares qualifying property to be community property for that federal basis purpose.

The South Dakota declaration is not itself a federal tax ruling. Federal law determines whether § 1014(b)(6) applies in a particular case. The file should address both spouses’ execution, domicile, the required statutory warning, qualified trustee, property schedule, contribution proportions, inclusion at death, ownership evidence, and asset-specific law.

Avoid promising a full basis adjustment from the state-language change alone. The result depends on federal requirements and the facts at death.

2026: secured attorney access to sealed trust records

South Dakota Supreme Court Rule 26-06 added § 21-22-28.1 effective July 1, 2026. The new section provides secured remote electronic access to a sealed trust-court record for an attorney of record under its terms. Section 21-22-28 continues to govern sealing and authorized access.

Litigation teams and court administrators should update access procedures. Client materials should explain that sealed means unavailable for ordinary public inspection under the statute. It does not mean the file is invisible to the court, parties, authorized attorneys, tax authorities, or lawful discovery.

Forms and procedures worth auditing now

The 2025–2026 changes justify a targeted review of:

• directed-office definitions and responsibility schedules;
• tax-adviser appointment, acceptance, powers, and instruction forms;
• administrative-trustee and excluded-fiduciary agreements;
• decanting resolutions, beneficiary notices, and closing checklists;
• grantor tax-reimbursement clauses, decision records, and insurance controls;
• special spousal trust warnings and federal basis explanations;
• trust-court access and confidentiality procedures; and
• transition provisions for trusts created or moved around July 1, 2026.

The correct conclusion may be that no document change is needed. An instrument might already provide suitable authority, expressly override a new default, or fall outside an application clause. Record that conclusion and the provisions reviewed.

What the enactments did not do

Neither act automatically converted existing trusts into directed arrangements, appointed tax advisers, compelled grantor reimbursements, guaranteed federal basis treatment, or validated a decanting that failed its other requirements. State legislation also did not rewrite federal bankruptcy, income, gift, estate, or generation-skipping tax law—or another state’s rules.

That distinction is central to accurate South Dakota trust-law content: statutory authorization supplies a possible tool, while the instrument, fiduciary duties, facts, federal law, and other jurisdictions determine whether and how the tool can be used.

Refresh the research before implementation

Before relying on this article for drafting or administration, search current Title 55 and chapter 21-22, review later corrections and special-session enactments, confirm Supreme Court rules and effective dates, separate introduced measures from enacted law, compare affected forms to the current text, and recheck every federal provision incorporated by reference.

The research ceiling for this update is July 19, 2026. That date is part of the legal analysis, not merely publication metadata. Any later South Dakota trust transaction needs a new official-source check.