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South Dakota, Little Tax Haven on the Prairie

South Dakota courts the rich with safeguards for family fortunes
South Dakota, Little Tax Haven on the Prairie
Illustration by 731

Among the nation’s billionaires, one of the most sought-after pieces of real estate is a former S.S. Kresge five-and-dime that’s been converted to offices in Sioux Falls, S.D. A branch of Chicago’s Pritzker family rents space in the building on South Phillips Avenue; the Minnesota clan that controls the Radisson Hotels chain has an office down the hall; and Miami and Hong Kong families rent other rooms. Most days, the offices are shut. Even when empty, they provide their tenants with an important asset: a South Dakota address for the trust company that holds their wealth.

South Dakota was a pioneer in “dynasty trusts,” which allow families to escape estate taxes forever. The state offers iron-clad secrecy for trusts and protection of assets from creditors and former spouses. It also has rules that make it easier for families to set up their own trust company, rather than rely on a bank trustee, and to enhance their control over trust investment decisions. An added attraction: South Dakota levies no state income taxes on investments.