South Dakota is not a community property state: buying a home

Is South Dakota a community property state?

No. IRS Publication 555 (December 2024) says it is written for married taxpayers in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. South Dakota is not on the list. The same publication adds a note that it “doesn’t address the federal tax treatment of income or property subject to the ‘community property’ election under Alaska, Tennessee, and South Dakota state laws.”

That note points to the one way South Dakota law allows community property: by choice, through a trust (see below). Without one, a home bought by a married couple is not presumed to belong to both spouses in equal shares.

What happens to a home at divorce?

South Dakota follows an equitable-division rule. Under SDCL 25-4-44, when a divorce is granted, “the courts may make an equitable division of the property belonging to either or both, whether the title to such property is in the name of the husband or the wife.” The court “shall have regard for equity and the circumstances of the parties.”

Three points follow from the statute:

• Title does not decide the outcome. A home in one spouse’s name only can still be divided.
• Equitable does not mean equal. The statute sets no fixed split. The court looks at the circumstances.
• The statute does not list factors or a 50/50 default. A family-law attorney can explain how courts have applied it.

Do both spouses have to sign when you sell or borrow?

For a homestead, yes. Under SDCL 43-31-17, a conveyance or encumbrance of a homestead by its owner is valid, if the owner is married and both spouses are residents of the state, when both spouses concur in and sign it, either on one instrument or on separate instruments. The statute has one exception: for the sole purpose of a home loan under the federal VA program, a spouse’s signature alone is enough if the service member is officially declared missing in action, captured or detained by a foreign power.

Under SDCL 43-31-2, the homestead embraces the house the owner uses as a home. Under SDCL 43-31-1, a homestead is also exempt from judicial sale and judgment liens, as the statute provides. When you buy from a married seller, ask who owns the home and whether the other spouse will sign. See also closing costs in South Dakota and title insurance.

How can spouses hold title?

South Dakota’s statutes set out joint tenancy: it exists when property is held in equal shares by a title created by a single will or transfer and the document expressly declares a joint tenancy (SDCL 43-2-12). A deed from one spouse to the other that shows an intent to create a joint tenancy is read that way (43-2-13), and so is a deed to two or more grantees (43-2-14).

The statutes read for this article do not state what each form means at the death of an owner. Ask the title company or an attorney which survivorship rules apply to your deed.

What happens at the death of a spouse?

Two rules protect a surviving spouse:

• Homestead. On the death of either spouse, the survivor may continue to possess and occupy the whole homestead until it is otherwise disposed of according to law (SDCL 43-31-13).
• Elective share. A surviving spouse of a person who dies domiciled in South Dakota may elect to take a percentage of the augmented estate that grows with the length of the marriage: 15% after 5 years, 30% after 10 years and 50% after 15 years or more (SDCL 29A-2-202). If the sums received fall short of $50,000, a supplemental amount of up to $50,000 applies.

Without a will, the surviving spouse takes the entire intestate estate if the decedent has no descendants, or if all of the decedent’s descendants are also the spouse’s. If some descendants are not the spouse’s, the spouse takes the first $100,000 plus one-half of the balance (SDCL 29A-2-102).

Can spouses choose community property? The special spousal trust

Yes. Chapter 55-17 of South Dakota Codified Laws, enacted in 2016, creates the special spousal trust. The chapter calls the property “special spousal property” and defines it as community property. According to the statute:

• One or both spouses transfer property to a trust that expressly declares the property to be South Dakota special spousal property. Both spouses must sign, and at least one trustee must be a “qualified person” under SDCL 55-3-41 and 55-3-39 (55-17-1).
• The trust must open with a warning in capital letters about its consequences for creditors, divorce and death, and advise independent legal advice (55-17-2).
• Unless the trust says otherwise, each spouse’s interest is fifty percent (55-17-3).
• Spouses may agree on management, disposition at divorce or death, and governing law, but a child’s right to support cannot be affected (55-17-9, 55-17-10).
• A buyer in good faith who purchases from the spouse who manages the property takes it free of the other spouse’s claim (55-17-12).
• A trust signed during the marriage is not enforceable if it was unconscionable, signed involuntarily, or signed without fair disclosure of the other spouse’s finances (55-17-14).

For federal tax, the statute states that, for the application of 26 U.S.C. § 1014(b)(6), a South Dakota special spousal trust is a trust established under the community property laws of the state (55-17-5). IRS Publication 555 says it does not address that treatment, so ask a tax professional before relying on it.