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Purpose Trust

As the name implies, this trust is created for a specific purpose, rather than for a particular person or group of people. These non-beneficiary trusts are an invaluable planning vehicle designed to preserve and maintain what’s most important to clients, families and future generations.

Historically, a trust without beneficiaries would fail, as there was no one to enforce its terms in a court of law. The exception? A charitable trust, with enforcement assigned to the state’s Attorney General. Relatively recent Uniform Trust Code developments support the creation of non-beneficiary trusts for pets (and their offspring) and for preserving or maintaining burial sites. However, South Dakota is one of a few states that allow a trust’s creation for any conceivable purpose that doesn’t violate the law or public policy. And South Dakota is the only jurisdiction where a Settlor can establish a perpetual dynasty purpose trust.

Benefits
  • Legacy – Maintains tangibles, including collections of jewelry, art, antiquities, coins or historical artifacts. The ongoing maintenance and care may be funded by the trust, and objects can be preserved to benefit future generations.
  • Preservation –
    • Maintains and furthers family business interests, including private family trust companies or family limited partnerships and LLCs.
    • Ownership interests may be held within the trust and managed according to Settlor’s stated purpose.
    • Can be used to continue operating a family farm or ensures that a family residence or childhood home is cared for according to specific standards.
  • Future use – Protects digital assets, including cryptocurrency, digitized intellectual property and even cryogenics.
Structure
  • Trust enforcer –
    • Appointed co-fiduciary responsible for monitoring and ensuring that the trust is administered in accordance with its articulated purpose.
    • Has authority to seek court’s remedy in the event of trustee’s non-performance.
  • Trust protector –
    • May or may not be same person as trust enforcer.
    • Critically important role – responsible for modifying trust as conditions evolve over time. For example, trust protector may appoint beneficiaries when trust has fulfilled its purpose.
    • South Dakota’s comprehensive trust protector statute also includes the ability to modify trust terms, terminate trust, decant trust, change/add beneficiaries or change trust situs.
Advantages
  • A South Dakota purpose trust may be created as a perpetual dynasty trust, ensuring that the purpose trust can either:
    • Carry out its purpose forever or
    • (e modified to a beneficiary or fully charitable trust when the purpose has been served
  • Settlor can maintain a substantial level of control by utilizing South Dakota’s directed trust structure, integrating family members and trusted advisors who are best qualified to oversee purpose trust.
  • South Dakota’s purpose trust statute is the country’s broadest, allowing creation of a trust for any purpose so long as that purpose does not violate the law and is not in violation of public policy.
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Sterling Trustees is a South Dakota-chartered trust company, regulated by the South Dakota Department of Banking. South Dakota, at the forefront of creating progressive trust legislation, is one of the country’s leading trust jurisdictions. That means that our company is able to help you leverage the latest and most advanced trust law available. read more