SOUTH DAKOTA INHERITANCE/ESTATE TAX GENERAL INSTRUCTIONS
TAX IMPOSED: The inheritance tax is imposed upon any transfer of a decedent’s property, real, personal or mixed, or any interest
therein or income therefrom, in trust or otherwise to any person, association, or corporation if the decedent was a resident of South Dakota.
If the decedent was a non-resident, the tax is imposed on his/her property within the taxing jurisdiction of South Dakota. SDCL 10-40-2.
EXEMPT TRANSFERS: Transfers of intangible personal property made by non-residents are exempt from inheritance tax if the state
of residence of the non-resident exempts South Dakota residents from transfer/death taxes or grants reciprocal exemptions. Transfers to
organizations qualifying under SDCL 10-40-23 (1) and (2) and transfers between spouses are exempt.
TRANSFERS IN CONTEMPLATION OF DEATH: If death occurred prior to July 1, 1989, SDCL 10-40-1(1) defined contemplation
of death as the “expectancy of death which actuates the mind of the person on the execution of his will.” See In re Estate of Pearson,
419 N.W.2d 704 (S.D. 1988). If death occurred after June 30, 1989, SDCL 10-40-1(1) defines contemplation of death as “any transfer
made with a dominant intention of avoiding the passing of the property transferred by testate or intestate laws. Any transfer made within
one year of the transferor’s death shall be presumed to have been made in contemplation of death, to the extent that the aggregate value
of the transfers to any single donee during a calendar year exceed ten thousand dollars, and the burden of proof to show otherwise is
upon the person seeking to rebut the presumption. The first ten thousand dollars of transfers to any single donee during a calendar year
or transfers made more than one year prior to the transferor’s death shall be deemed not to have been made in contemplation of death.”
ARSD 64:80:06:01 lists 12 factors that may be used to determine the grantor’s dominant intention under SDCL 10-40-1(1).
FILING REQUIREMENTS: The estate representative or interested party shall make and return under oath a full and detailed report
within nine (9) months after the decedent’s date of death. SDCL 10-41-17. If it is impractical to file the report within the nine months,
the Circuit Court may, on application, extend the time for filing the report. SDCL 10-41-20. If there is more than one personal
representative, all must sign the inheritance report. The Department will not accept the attorney’s signature as authority to act on behalf
of the representative without prior written consent from the personal representative.
PLACE OF FILING: Reports shall be filed with the Clerk of Courts in the proper county and a copy of the report shall be mailed to the
Department of Revenue, Inheritance Tax, 445 East Capital Avenue, Pierre, South Dakota 57501.
VALUATION OF PROPERTY TRANSFERRED: All property transferred by a decedent is to be valued at the true and full market value
in money on date of death. SDCL 10-40-26 as defined by SDCL 10-40-1(10). The value of a limited or future estate, income, interest, or
annuity, including life estates, dependent on any life or lives in being, shall be determined by the use of the annuity table. SDCL
10-40-14. If death occurred prior to July 1, 1991, the 5% table is used and if death occurred after June 30, 1991, the 7.5% table is used.
If the report preparer is unable to calculate the value of the limited or future estate, i.e. life estates, please so state on the report, and
the Department of Revenue will compute the values.
SDCL 10-40-21(6) QUALIFYING FARM OR BUSINESS PROPERTY ENTITLED TO A REDUCED RATE: For deaths occurring
after June 30, 1991, every transferee, except a lineal issue or lineal ancestor, who receives qualifying property as defined by SDCL
10-40-21(6), is entitled to use the Table 6 rates on the value of that qualifying property. In computing the tax, “on a qualifying transferee
who is also receiving non-farm or non-business property, the inheritance tax rates and increased rates shall be applied in a consecutive
manner. The tax shall first be imposed on the value of the non-farm or non-business property received by the qualifying transferee. Then
the tax shall be imposed on the value of the farm or business property starting in the same rate or increased rate category where the value
of the non-farm or non-business property ends.”
AMENDED REPORTS AND REFUNDS: An Amended or Supplemental Report must be filed to show adjustments in valuations or
deductions, or newly discovered property. ARSD 64:80:02:01. The application for a refund must be “made within three years from the
payment thereof or in cases arising under SDCL 10-40-16, within one year after happening of the contingency whereby a refund becomes
due.” SDCL 10-41-84.
TAX LIEN WAIVER AND CONSENT TO TRANSFER PROPERTY: After checking against the inheritance tax report for accuracy,
the Department of Revenue will sign an Inheritance Tax Lien Waiver and Consent to Transfer Property submitted after the tax,
if any, has been paid or if the court having jurisdiction over the proceedings authorizes the waiver of such lien. SDCL 10-41-68.
SOUTH DAKOTA ESTATE TAX (SDCL Chapter 10-40A): For resident decedents, the South Dakota estate tax is in the amount that,
together with any other state death taxes imposed by this state, equals the amount of the state death tax credit allowable under the federal
estate tax. The South Dakota estate tax shall be reduced by state death taxes other than “pick-up” taxes imposed by any other state in
respect to any property included in a decedent’s gross estate.
For non-residents, the South Dakota estate tax is equal to a portion of the death tax credit, computed by applying to the allowable credit
the same ratio as exists between the portion of the decedent’s gross estate located in this state and the decedent’s entire gross estate less
any other death taxes paid to this state.