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, grantor income-tax reimbursement, beneficiary advancements, fiduciary counsel, decanting, special spousal trusts, and access to sealed court records. The 2026 provisions discussed here took effect July 1, 2026, so they are effective law rather than proposals.

This update was checked against official sources through August 30, 2026. A live transaction 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 advisor

Chapter 196 added the tax trust advisor to South Dakota’s recognized directed-trust offices. Read the current definitions in § 55-1B-1 with §§ 55-1B-9 and 55-1B-13. When a governing instrument provides for this office, § 55-1B-13 supplies the listed tax powers unless the instrument expressly provides otherwise. The office and its authority still need to be identified clearly in the trust’s governing documents.

The enactment did not appoint a tax advisor in every existing trust. A trust seeking to use the role needs governing-instrument authority, a valid appointment and acceptance, and a workable operating process. If the current document does not authorize the office, 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 identify who supplies the data, when a direction is due, who signs or files a return, and where the instruction is preserved. Under § 55-1B-4, an investment, distribution, or tax trust advisor is a fiduciary for the powers described there, subject to the governing instrument and the statute.

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, distribution, and tax decision identifies the authorized actor, required consent, implementing office, and record owner. A family advisor is a separate statutory office; it should not be grouped with the three fiduciary trust-advisor roles as though all four titles carry the same legal status.

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 governing instrument expressly prohibits it, the section allows an eligible trustee, in the trustee’s sole discretion, to pay a taxing authority directly or reimburse the person taxed because that person is treated as the owner of all or part of the trust under the cited federal grantor-trust rules. The trustee cannot be the trustor or a related or subordinate party to the trustor under the incorporated federal definition.

A trust advisor or trust protector may direct or consent to the payment only if that person is neither the trustor nor a related or subordinate party to the trustor. If the trust holds a policy on the trustor’s life, the policy’s cash value and proceeds of a loan secured by an interest in the policy cannot fund the payment. The statute also says that the power—or a decision to exercise or direct it—does not make the trustor a beneficiary under South Dakota law.

The section does not apply if doing so would disqualify a trust for, or reduce, an otherwise available marital or charitable deduction for state or federal income, gift, or estate-tax purposes. It applies only to trusts created on or after July 1, 2026, and trusts whose principal place of administration moves to South Dakota on or after that date. A trust outside that application language needs an independent source of authority rather than an assumption that the new default applies.

This is discretionary authority, not a beneficiary entitlement or a promise of federal tax treatment. Under the section’s terms, a trustee, trust advisor, or trust protector is not liable for the decision to reimburse or not reimburse, and that decision is not a breach of fiduciary duty. Before exercising the authority, review the instrument, the federal provisions incorporated by the statute, possible estate-inclusion issues, liquidity, fiduciary purpose, insurance restrictions, deduction consequences, and the law of every other state with a meaningful connection.

2026: § 55-2-15 receives a technical update

Chapter 198 amended § 55-2-15 again, largely modernizing wording and updating federal-reference dates. It did not create a second decanting regime. A decanting or first-trust modification completed on or after July 1, 2026 should be reviewed under the current codified text, not solely against the 2025 enactment.

The section still operates through its trustee standards, beneficiary limits, tax protections, and notice rules. Update internal checklists, notices, resolutions, and opinion templates to cite and quote the current section accurately.

Do not describe the 2026 edits as newly authorizing decanting, removing the beneficiary protections, or replacing the 2025 framework. Their practical importance is that current forms and legal analysis should use current language and incorporated federal dates.

2026: written rules for beneficiary advancements

New § 55-3-50 supplies a default rule for deciding whether certain lifetime gifts or trust distributions reduce a beneficiary’s later share. Property given from a revocable trust during the trustor’s lifetime is not treated as an advancement unless the trustor declares that treatment in writing, the beneficiary acknowledges it in writing, or the writing otherwise says the gift will be considered when the trust estate is later divided and distributed.

A discretionary distribution from an irrevocable trust is also not treated as an advancement by default. The result changes when the trustee or distribution trust advisor declares it in writing, the beneficiary acknowledges it in writing, or the governing instrument provides for equalizing discretionary distributions within or between beneficiary classes. Property treated as an advancement is generally valued when the beneficiary takes possession or enjoyment.

The practical lesson is simple: do not leave equalization to memory. A distribution record should state whether the payment is an advancement and preserve the writing with the trust’s accounting and beneficiary files.

The South Dakota trust distributions guide places that rule in the broader process for classifying an interest, identifying the decision maker, evaluating a request, and recording the payment.

2026: fiduciary counsel and attorney-client privilege

New §§ 55-4-59 and 55-4-60 clarify whom a fiduciary’s attorney represents and who controls the privilege. Unless a written agreement expressly provides otherwise, an attorney-client relationship with a fiduciary does not impose duties on other people interested in the estate, trust estate, or other fiduciary property. That remains true even if fiduciary funds pay the legal bill or a beneficiary is entitled to accountings or other information.

Communications between the fiduciary and the attorney are privileged unless the fiduciary waives the privilege. The fiduciary relationship between the fiduciary and a beneficiary does not, by itself, waive it. Engagement letters, invoices, requests for advice, and beneficiary communications should be written with those distinct relationships in mind.

2026: technical and recordkeeping provisions

Chapter 198 also revised § 55-4-33. The current section states that a trustee who violates chapter 55-4 may be removed and denied compensation in whole or in part, and that a beneficiary, cotrustee, or successor trustee may treat the violation as a breach of trust. Until a court orders compensation to stop, the trustee remains entitled to fees and expenses.

The act modernized wording in § 55-16-10 without newly creating its core creditor periods or personal-property filing requirement. The current section continues to treat certain public filings as discovery of a transfer and requires a bill of sale or other transfer instrument conveying personal property to a chapter 55-16 trust to be filed in the applicable public office. The filing county depends on the transferor’s South Dakota residence or, in other cases, the trustee’s principal residence or place of business in the state. Chapter 55-16 planning should confirm the current filing rule rather than assume that executing a private assignment is enough.

2026: special spousal trust language

Chapter 198 updated wording and the federal-reference date in § 55-17-5, which addresses a South Dakota special spousal trust and 26 U.S.C. § 1014(b)(6). The act did not newly create the chapter’s core special-spousal-property characterization.

South Dakota’s statutory treatment is not 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 warning required at the beginning of the instrument, at least one trustee satisfying §§ 55-3-39 and 55-3-41, valid transfer of each asset, 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. Section 21-22-28 identifies people who may inspect the file and allows the court to admit other interested people upon a showing of need; § 21-22-28.1 adds secured remote online access for the attorney of record shown in the court record.

Forms and procedures worth auditing now

The 2025–2026 changes justify a targeted review of:

• directed-office definitions and responsibility schedules;
• tax trust advisor 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;
• advancement and distribution-equalization records;
• fiduciary engagement letters and privilege procedures;
• chapter 55-16 personal-property transfer filings;
• 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 advisors, compelled grantor reimbursements, treated every lifetime distribution as an advancement, made a fiduciary’s attorney the beneficiary’s attorney, 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 August 30, 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.