Powerful Combination for NRAs: U.S. domestic life insurance and a South Dakota Trust.

Domestic life insurance for NRAs is an exempt U.S. situs asset not subject to U.S. estate taxes. Consequently, the proceeds from a life insurance policy paid by a U.S. insurer on the life of a non-U.S. individual aren’t U.S. situs property for estate tax purposes. However, most domestic insurance companies require that the NRA have a tie to the United States to secure the insurance. Thus, a South Dakota trust, although not required to save U.S. estate taxes, is frequently used to serve this purpose. If the policy is large enough and/or private placement life insurance is purchased, then the NRA frequently chooses a low premium tax modern domestic trust jurisdiction. As demonstrated by the chart below, South Dakota has one of the lowest state premium taxes for trusts and the lowest for LLCs.

Selected State Premium TaxesPremium Tax
Arizona200 bpts.
California235 bpts.
Colorado200 bpts.
Connecticut175 bpts.
Florida175 bpts.
Georgia225 bpts.
Illinois50 bpts.
Massachusetts200 bpts.
Minnesota200 bpts.
Nevada350 bpts.
New Hampshire125 bpts.
New Jersey210 bpts.
New York200 bpts.
Ohio140 bpts.
Oregon200 bpts.
Pennsylvania200 bpts.
South Dakota8 bpts. - Both LLCs and trusts
Texas175 bpts.
Washington200 bpts.