Special Purpose Entities:

Many families wish to establish special purpose unregulated entities, such as LLCs that will not act as Trustee, but will serve a special purpose and provide the responsibilities of Trust Protector as well as Investment and/or Distribution advisor and/or Committee which advise and direct the administrative trustee.  In many family trusts, the members of the Investment Committee, Distribution Committee and/or trust protector are trusted family advisors such as attorneys, accountants and family office members that want to assist the family, but are concerned about personal liability.  Additionally, family members also serve in these roles and traditionally are without liability protection.  These special purpose entities are created in order to provide better protection to the members of the committees that are directing an Administrative Trustee.  South Dakota is one of the few states to allow these special purpose entities.

In most cases, it is difficult if not impossible to get liability insurance coverage for individuals who serve in these trust advisory roles or as co-trustees.  However, some insurance companies will provide insurance to Directors and Officers as well aserrors and omission insurance coverage to board members, officers and/or employees of such special purpose entities established for these limited purposes.  There may also be estate tax inclusion issues if the family members are acting in their individual capacity that may not exist if there was a properly structured entity created with other independent advisors included.  Additionally, an entity would provide legal continuity as its corporate existence would continue without regard to any single individual's death, disability or resignation.  The entity typically has by-laws that allow for additional members to be added or removed so that the entity can continue along with the trust.

For additional information please contact us or visit SDTC's main website, www.sdtrustco.com .