When selecting the best U.S. trust jurisdiction, an often overlooked, but extremely important factor is a state’s fiscal soundness and stability. Currently, top-tier trust jurisdictions like South Dakota have no state income tax which is one of the factors that renders the state so attractive to planners. However, there is no guarantee this will always be the case which is why evaluating the fiscal strength of a state when selecting a trust jurisdiction is essential.

An objective evaluation, considering multiple factors, reveals that South Dakota is unequivocally the most fiscally sound of all the top-tier U.S. trust jurisdictions. With respect to the likelihood that South Dakota will ever impose a state income tax, consider the following facts and watch the video below to learn more.

• South Dakota has a constitutional prohibition against estate and inheritance taxes and requires a 2/3 vote of both houses of the legislature to impose an income tax. These protections remain firmly in place, reinforcing the state’s long-standing commitment to a tax-friendly environment.
• South Dakota has maintained a balanced budget every year since statehood, reflecting the state’s disciplined and responsible fiscal management.
• Despite having no income tax, South Dakota has historically ranked among the top states for tax revenue stability. According to The Pew Charitable Trusts, South Dakota continues to maintain one of the most stable tax revenue streams in the nation, with revenue volatility well below the national average. ¹
• In terms of debt and unfunded retirement costs, South Dakota maintains its fully funded status, with public pensions still 100% funded – making it one of the strongest pension systems in the country. Additionally, South Dakota’s reserves stand at 13.3% of the fiscal year general fund budget, further reinforcing its financial strength. ²
• South Dakota consistently maintains a strong budget surplus and a well-funded rainy day reserve, ensuring the state remains prepared for economic uncertainties.
• South Dakota has maintained a AAA bond rating from all three major rating agencies, underscoring its strong fiscal standing and responsible financial management. ³
• The Mercatus Center at George Mason University ranked South Dakota 2nd in the nation for overall fiscal condition, based on factors such as cash solvency, budget solvency, long-run solvency, service-level solvency, and trust fund solvency. ⁴
• South Dakota remains a key player in the banking industry, consistently ranking among the top states in total bank assets.
• South Dakota boasts the lowest unemployment rate in the nation, reflecting a strong and resilient economy supported by business-friendly policies, economic stability, and a thriving job market. ⁵

Watch the short video below from Bridgeford Trust Company to learn more.