Hail, South Dakota, a great state of the land!
Cronyism, secrets, and tax-dodging—that’s what makes her grand!
That song came to mind the last time I wrote about South Dakota’s tax-dodging trust laws. With apologies to DeeCort Hammitt, I revisit the topic, as multiple friends of the blog tweet an article on Worth.com that touts South Dakota’s tax-friendly trust laws:
Best-kept secrets are never well kept, and for good reason. One of the best secrets quickly finding its way to the desks of advisors to the wealthy is the very substantial advantages of moving wealth to trusts in top-tier trust-law states.
South Dakota tops that list. It’s known as the Mount Rushmore state, for its tornadoes, blizzards, ethanol, the Badlands and all sorts of other exotic fare. But over the last decade, South Dakota’s leaders have recognized that a scarce resource and one of their competitive advantages is the ability of their legal community to work with their elected state officials. The result is an impressive body of law that makes South Dakota an extremely attractive place to house wealth [Timothy Kneen, “Why Is My Financial Advisor Suddenly Talking So Much About South Dakota?” Worth, Dec 2015/Jan 2016, downloaded 2015.12.30].
The article appears to come from Timothy Kneen, chief investment officer of IFAM Capital, a Denver-based financial consulting firm (middlemen!) with a Sioux Falls office headed by former elected state official Tom Dempster, who apparently worked with South Dakota’s legal community to legislate for himself a really nice job helping billionaires hide—oh, sorry, house—their assets.
Kneen sandwiches his pitch for clients for Dempster between absolute non sequiturs:
South Dakota has long had a populist streak. It was the first state to allow citizens to refer laws passed by the legislature and even to initiate laws themselves.
This populist streak is now infused into South Dakota’s trust laws, allowing people to discreetly avoid federal estate tax laws and the high income taxes of other states. As an aside, according to the FDIC, South Dakota leads the nation for bank assets housed in the state, at $2.7 trillion. South Dakota is also comfortably included in the list of top states for philanthropic giving in the country [Kneen, 2015.12.30].
As a genuine populist democrat, I take offense at Kneen’s nonsensical equation of the enshrinement of people power in Father Haire’s initiative and referendum amendment and the pandering of the modern Legislature, which hates initiative and referendum, to sneaky plutocrats trying to avoid paying their fair share of taxes. And the fact that South Dakotans like to give to charity casts no moral glow on our willingness to let lawyers and financiers co-opt our legislature to give handouts to out-of-state billionaires.
Kneen cites the December 2013 Bloomberg article on South Dakota’s tax-dodging trust laws. Kneen refers to the article by its gentler Prairie Business reprint headline, “SD Tax-Friendly Trust Laws Draws [sic] Billionaires,” rather than the headline Bloomberg chose, “Moguls Rent South Dakota Addresses to Dodge Taxes Forever,” which more directly details the service Kneen and Dempster are offering you, Mr. and Mrs. Zillionaire!
Wait, maybe just Mr. Zillionaire, not that scheming former Mrs.—Kneen highlights this line from Bloomberg as part of his list of what makes South Dakota great for hiding assets:
Others are drawn by South Dakota’s iron-clad secrecy and protections of trust assets from creditors and ex-wives, with features emulating those available in Bermuda and other island havens [Zachary R. Midler, “Moguls Rent South Dakota Addresses to Dodge Taxes Forever,” Bloomberg, 2013.12.26].
Oooo, those cursed money-grubbing ex-wives! Tax-dodging, secrecy, and misogyny! Hail, South Dakota!