Few states allow a grantor to protect assets that remain for his or her own benefit. South Dakota has one of the best protection statutes available.
The largest issue many families face is protecting against the invasion of assets from unwanted sources. Clearly, it is difficult to hide the fact that a family may have significant assets but it is possible to build higher “fences” in an attempt to keep these assets from being expropriated.
One of the ways to protect assets through a trust is with a “self-settled” trust. A self-settled trust is generally an irrevocable trust that can be established so the settlor or grantor can be a beneficiary of the trust. If the trust is structured under South Dakota law properly, creditors cannot access assets in the trust to satisfy legal obligations of the settlor. Self-settled trusts are drafted to be either included or removed from the grantor's estate, depending on the grantor's desires. Self-settled asset protection trusts can generally be established even if a grantor's gift tax exemption has been fully utilized. In addition to asset protection, self-settled trusts may also result in state income tax savings, if properly structured and sitused in South Dakota. The grantor generally remains a discretionary beneficiary of such a trust.