Estate planning in South Dakota involves the management and distribution of your real and personal property after your death, or if you should become mentally incapacitated.
Making a Will
A will is one of the simplest methods of estate planning. It sets forth your intent regarding how you want your property to be distributed when you die, and it can be revoked or modified during your lifetime. If you die intestate, or without a will, the state of South Dakota will appoint an administrator and distribute your assets according to the state’s succession laws. This may not be as you intended and it might invite family disputes.
A will should include the following:
- Property distribution
- Provisions for children
- Executor to administer the estate
Probate is a judicial process that determines your will’s validity, inventories your estate, and distributes your assets to your beneficiaries after all taxes and debts are paid. Even with a will and with other planning tools, probate might not be avoided completely, especially with large estates. However, there are ways to dispose of assets during your lifetime to avoid probate, including:
- Living trusts: A revocable trust holds certain property in a trust while allowing you to act as trustee and continue to control them. A trust becomes irrevocable when you die or become incapacitated and is then managed by your appointed successor trustee. Trusts can include nearly any kind of asset.
- Joint ownership: Joint ownership of real or personal property with a right of survivorship allows title to automatically pass to the surviving joint owner at your death.
- Payable or transfer on death designations: A bank account, stocks and bonds may have a POD or payable-on-death designation or a transfer-on-death designation. These automatically transfer rights to the accounts when you die. Deeds can also have transfer-on-death designations.
- Irrevocable life insurance trust: Transferring ownership of a life insurance policy to a trust will reduce the value of your estate for estate tax purposes, but you lose control of the policy during your lifetime and you can't change the beneficiary.
- Small estate exemptions: South Dakota has a summary process for estates valued at $50,000 or less. This process allows an heir to file an affidavit to accomplish probate. An informal probate procedure is also available for estates of any size.
Financial Power of Attorney
This instrument appoints someone to handle your financial affairs during your lifetime. Designating it as a durable power of attorney means that it takes effect immediately and continues if you become incapacitated. You can limit your agent’s power or designate the document as a “springing” durable power of attorney, which makes it effective only when a physician certifies that you're mentally incapacitated.
Health Care/End-of-Life Decisions
- Living will: Also known as a health care directive, this sets forth your intentions regarding end-of-life health measures.
- Power of attorney for health care: A power of attorney for health care delegates power to a trusted individual to make critical decisions about your health if you become mentally incapable of doing so yourself. Forms for South Dakota are available online for a fee, or they can be obtained at hospitals or health care facilities. You can modify these by destroying the old one and creating a new one, but make sure health care providers have a copy of the new one.
Additional Planning Considerations
Most individuals should consider some other estate planning measures. These include:
- Estate taxes: As of 2013, only very large estates valued at $5.25 million or more are subject to federal estate taxes. South Dakota has not had a state estate tax since 2001.
- Life insurance: Life insurance can provide a valuable financial cushion if your children, spouse, or other dependents need support after your death. If you have other sources of benefits like a pension, group life insurance, or a large IRA, this may be an unnecessary expense.
- Qualified personal residence trust: A qualified personal residence trust is an irrevocable trust that allows you to transfer your home to your children, resulting in a minimal taxable gift. You may continue to live in the home for a set period before it goes to your children without incurring any additional estate or gift taxes.
- Pet trusts: Since 2006, South Dakota allows you to create a pet trust for the care of your pets until the last animal passes away.
Speak to a South Dakota Estate Planning Attorney
State and federal estate laws are constantly evolving. Speak with a South Dakota estate planning lawyer to ensure your assets, personal, medical and financial affairs are managed according to your intentions.