South Dakota Foreign Grantor TrustsA South Dakota Foreign Grantor Trust is established as a “foreign” trust for U.S. tax purposes and therefore is treated the same as an offshore trust. The benefits of a Foreign Grantor Trust include the following:
- Typically, the trust assets are all in off-shore entities and therefore the trust is not generally subject to U.S. income tax (except for any U.S.-source income).
- The trust is typically revocable and distributions are only to the grantor or grantor’s spouse.
- Upon the grantor’s death, the trust can be transformed to a South Dakota Dynasty Trust to avoid the U.S. income tax on distributions of accumulated income.
- The trust may be funded with other off-shore corporate entities, such as PICs, to avoid U.S. estate taxes.
- The trust may reduce exposure to sovereign risks.
- South Dakota is generally a transparent, non-blacklisted jurisdiction.
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