South Dakota has been in the news in recent years for its half a trillion dollar assets. It is considered the closest port in the US! Impressive, isn’t it? According to the FDIC’s banking statistics report, South Dakota ranks first with $ 3.13 trillion in commercial and savings bank assets, well ahead of Ohio with $ 2.96 trillion.
According to the South Dakota Department of Labor and Regulation, trust companies held approximately $ 175 billion in assets, up 45% over the past two years. These trust assets are mainly used for wealthy people to keep their assets safe for the longer term. And in South Dakota, these trusts are growing exponentially, largely due to the country’s permissive trust laws.
But the real question that arises here is how does South Dakota hold such a large amount of assets? Previously, in October, Pandora Papers (millions of financial records) fell into the hands of journalists. Within that, state data showed that South Dakota had half a billion dollars in assets in its trust.
And that’s what we’ll discuss in brief in this article. So, Let’s begin!
Major laws passed by South Dakota
Almost four decades ago, the state passed some of the most important laws in its financial systems, namely: removing the interest rate cap on loans and no expiration date for trust laws.
This draws the attention of the financial industry primarily to the state. The state has zero tax revenue This makes it one of the most popular places for people who want to give away their wealth in the future without having to pay inheritance tax. Since then, South Dakota has gained huge customers.
the Pandora papers revealed how politicians and business people transferred their assets to US trust funds to protect them from paying taxes or doing direct business.
Low US tax rates
“The US is widely recognized as the best place in the world to get hot money,” said Heller. The main reason for this is that investors are not required to report foreign assets to the respective countries.
With the extremely smooth and indulgent banking system of the United States, wealthy families and business people come here to enjoy the same level of privacy they were previously given from places like Switzerland.
That does USA is the second most ranked tax haven in the world, according to the Tax Justice Network report. And states like South Dakota and Nevada are widely considered to be the most attractive places for tax evaders.
South Dakota is an important location for foreign assets
Pandora papers have revealed many important facts about US wealth and taxes, including South Dakota as a tax haven for wealthy families and business people. The state is considered to be the main attraction for foreign assets.
The report found that South Dakota has more than quadrupled to $ 360 billion in the past few decades.
The South Dakota legislature designed the legislation of trust industry insiders that provides them with great protection and advantages over trust funds for trust clients in the United States and abroad.
The biggest flex for the rich is the state ban on the “rule against eternity”. This creates a very safe space for the wealthy families to set up their dynasty trust and run it forever, with no inheritance tax burden.
Zero income or inheritance tax on trusts
Another major reason wealthy families and businesspeople seek trust in South Dakota is the extremely lenient tax regime. The state has no income or inheritance tax on the trusts. Yes it is very true!
All funds brought into the private trusts are not tied to a government income tax refund. South Dakota does not claim or collect the revenue from these trust funds, even if they are billions.
In addition, the state does not charge inheritance tax even after the owner’s death.
The people of South Dakota don’t necessarily have to invest in a local trust to live in the states. Although investors with multi-billion dollar trust funds are lying around in the states, they do not contribute directly to any sales or inheritance tax revenues.
As one of the most attractive places for wealthy families and business people, South Dakota is one of the top tax havens in the United States. People living in the state benefit from South Dakota’s mild trust laws.
In fact, the state is expected to experience the largest transfer of wealth that has ever occurred in human history. And that’s why the trust companies in South Dakota have increased the labor market within the state in recent years. South Dakota benefits from its trust laws, as do the rich people who live in the state.
Are Taxes High in South Dakota?
No, South Dakota is one of the lowest tax states in the United States.
Which countries are considered tax havens?
South Dakota and Nevada are considered tax havens in the United States.
Is There Income Tax In South Dakota?
No, South Dakota does not collect income tax.