Most legislative enactments (unless they have an emergency clause attached to them) take effect on July 1. The 2026 South Dakota legislative session led to some interesting bills affecting financial institutions.
The Lawful Delay of Suspicious Transactions
One of the bills which will have a significant effect is House Bill 1238 which allows financial institutions (including banks and trust companies) to lawfully delay or refuse a transaction, withdrawal of funds, or change in ownership of an account from a consenting, senior, or vulnerable adult. Transaction is broadly defined to include wire transfers, ACHs, guarantees of loans, or change of beneficiaries. If a transaction is suspicious, the financial institution may in its discretion determine whether or not to act, or to notify a third party connected with the consenting, senior, or vulnerable adult. The delay can be up to the earlier of 30 days or when the institution is satisfied that the transaction is not resulting in financial exploitation. The definition of senior adult is any individual over 65, while vulnerable adult is any adult individual who has a substantial mental or functional impairment or for whom a guardian or conservator has been appointed. The definition of consenting adult is any accountholder who authorizes the financial institution, in writing, [to respond] to any reasonable concern regarding financial exploitation. Because of the proliferation of scams affecting customers, some financial institutions may wish to provide for such a consent in their account agreements.
Modification of the Agricultural Processor’s Lien
Another bill of interest to agricultural lenders is the modification of the agricultural processor’s lien. While generally requiring such liens to be filed electronically with the secretary of state, rather than locally with the register of deeds, the act has a delayed effective date of July 1, 2027, thus requiring both local and central checks to determine agricultural processor’s liens for the time being.
Trust Legislation
Finally, the bill proposed by the Governors Trust Task force passed the legislature and makes a number of technical changes. A default rule is added that allows the trustee in its discretion to provide for reimbursement of the grantor’s personal income tax liability in a grantor trust and is effective for trusts created or moved to South Dakota after July 1, 2026. Other provisions affect whether distributions are advancements, the attorney client privilege in the trust context, decanting from one trust to another, and the South Dakota special purpose trust. If financial institutions have questions about these technical items, they should seek specialized counsel.
The Financial Institutions lawyers at Davenport, Evans, Hurwitz & Smith are available to answer your questions. Contact a lawyer at 605-336-2880, [email protected], or find a specific attorney here.