South Dakota Codified Laws 55-1-43. Discretionary interests
The following provisions apply only to discretionary interests:
(1) A discretionary interest is neither a property interest nor an enforceable right. It is a mere expectancy;
Terms Used In South Dakota Codified Laws 55-1-43
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
- Property: includes property, real and personal. See South Dakota Codified Laws 2-14-2
- Trustee: A person or institution holding and administering property in trust.
(2) No creditor may force a distribution with regard to a discretionary interest. No creditor may require the trustee to exercise the trustee’s discretion to make a distribution with regard to a discretionary interest;
(3) A court may review a trustee’s distribution discretion only if the trustee:
(a) Acts dishonestly;
(b) Acts with an improper motive; or
(c) Fails, if under a duty to do so, to act.
A reasonableness standard may not be applied to the exercise of discretion by the trustee with regard to a discretionary interest. Other than for the three circumstances listed in this subdivision, a court has no jurisdiction to review the trustee’s discretion or to force a distribution.
Absent express language to the contrary, in the event that the distribution language in a discretionary interest permits unequal distributions between beneficiaries or distributions to the exclusion of other beneficiaries, the trustee may distribute all of the accumulated, accrued, or undistributed income and principal to one beneficiary in the trustee’s discretion.
Regardless of whether a beneficiary has any outstanding creditor, a trustee of a discretionary interest may directly pay any expense on behalf of such beneficiary and may exhaust the income and principal of the trust for the benefit of such beneficiary. No trustee is liable to any creditor for paying the expenses of a beneficiary of a discretionary interest.
Source: SL 2007, ch 280, § 20; SL 2009, ch 252, § 11.