Considering A Delaware Statutory Trust?
Defer Capital Gains Tax & Receive Passive Monthly Income
If you are tired of being a landlord but worried about your capital gains tax a DST can be the perfect solution. Our team of experts have over 10 years of experience in helping defer your capital gains tax with DST 1031 exchanges.
Are You In The 45-Day 1031 Exhange Window?
In a 1031 Exchange, you only have 45 days to identify a replacement property. We help streamline the process, guiding you through due diligence and transactional complexities to ensure you don’t miss key deadlines or tax benefits.
Why Should I Consider A DST?
Defer Capital Gains & Depreciation Taxes
This includes assessing their income, investments, deductions, and potential tax credits.
Fully Passive Investment
They can identify opportunities to optimize asset allocation, retirement contributions, and other financial decisions to reduce tax burdens.
Potential Appreciation on Principal
A tax planning and consultation service often provides ongoing support throughout the year.
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Learn More About Delaware Statutory Trust (DST)
Why Choose Delaware Statutory Trusts (DSTs)
When it comes to finding the best Delaware statutory trust company, quality matters. We are approved to offer our clients the most reputable Delaware statutory trust companies in the industry. We believe preservation of capital is a primary focus when doing a tax deferred exchange. We help our clients diversify by reputable dst companies as well as asset classes. When you work with us, we help build a quality diversified portfolio of real estate that is exotically resilient to constant market changes. We want to optimize your tax efficiency while providing passive income. Fill out the form to speak to one of our licensed qualified dst expert today!
Understanding Delaware Statutory Trusts (DSTs)
A Delaware Statutory Trust (DST) is a legal entity created under Delaware law that is commonly used for real estate investment purposes. This type of trust allows multiple investors to hold fractional interests in real estate assets while enjoying the benefits of limited liability and passive ownership. DSTs have gained significant popularity as a vehicle for 1031 exchanges, providing a structured approach to deferring capital gains taxes on real estate transactions.
Origins and Legal Framework of DSTs
The concept of a Delaware Statutory Trust is rooted in Delaware's statutory trust laws, which were established under the Delaware Statutory Trust Act (DSTA) of 1988. This law provides flexibility in structuring trusts for business and investment purposes, making Delaware an attractive jurisdiction for forming such entities. Unlike common law trusts, DSTs are legally recognized as separate entities with their own set of rights and obligations, which enhances investor protections and simplifies administration.
A DST operates under a trust agreement, which outlines its governing terms, the role of the trustee, and the rights of the beneficial owners. The trustee manages the DST’s operations and holds the title to its assets, but does not engage in active business operations beyond the scope of managing the trust’s property. Investors, known as beneficial owners, hold passive ownership interests in the DST, which makes it a suitable option for those seeking real estate investment without direct property management responsibilities.
Structure and Benefits of a DST
A DST is typically structured to acquire and manage income-generating properties, such as apartment complexes, office buildings, shopping centers, and industrial properties. Investors in a DST own proportional shares in the trust, which corresponds to their interest in the underlying real estate.Key benefits of DSTs include:
1.) Limited Liability Protection – Investors enjoy protection similar to that of corporate shareholders, meaning their liability is limited to their investment amount.
2.) Passive Investment Opportunity – Since the trust handles property management, investors receive income distributions without the need for active involvement.
3.) Eligibility for 1031 Exchanges – One of the primary advantages of DSTs is their qualification for Internal Revenue Code Section 1031 exchanges, allowing investors to defer capital gains taxes by reinvesting proceeds from a real estate sale into a DST.
4.) Diversification – Investors can diversify their real estate holdings by participating in multiple DSTs with different property types and geographic locations.
5.) Institutional-Grade Real Estate Access – DSTs often own large-scale, high-quality commercial properties that individual investors may not be able to afford independently.
6.) Stable Income Stream – DSTs generate rental income, which is typically distributed to investors as regular cash flow.
DSTs and 1031 Exchanges
One of the most compelling reasons investors utilize DSTs is for 1031 exchanges, a tax-deferral strategy that allows individuals to reinvest proceeds from the sale of an investment property into a like-kind asset without immediately incurring capital gains taxes.
Under IRS guidelines, DSTs qualify as like-kind property in a 1031 exchange, making them an attractive alternative to direct property ownership. This structure is particularly beneficial for real estate investors who want to exit active property management while still benefiting from real estate investment returns. Since DSTs are pre-packaged investments, they also help investors meet the strict 45-day identification period required for 1031 exchanges.
DST Restrictions and Considerations
While DSTs offer numerous advantages, there are some important restrictions and considerations:
1.) No Active Management by Investors – Unlike traditional real estate ownership, investors in a DST cannot actively manage the property or make decisions about its operations.
2.) Limited Refinancing Flexibility – A DST is typically structured as a single-purpose entity, which means it cannot take on additional debt or refinance properties once acquired.
3.) Illiquidity – DST investments are relatively illiquid, as there is no active secondary market for selling DST shares.
4.) Predefined Holding Period – DSTs generally have a finite lifespan, with most operating between 5 to 10 years before the assets are sold and proceeds distributed to investors.
5.) Minimum Investment Requirements – Many DSTs have a minimum investment threshold, often starting around $100,000, which may not be accessible to all investors.
Who Should Consider Investing in a DST?
DSTs are best suited for investors looking for passive real estate ownership with tax advantages. Typical investors include:
- 1031 exchange participants seeking to defer capital gains taxes.
- Retirees or passive investors who want income-producing real estate without management responsibilities.
- High-net-worth individuals seeking diversification and stable cash flow.
- Estate planners looking for a structured real estate investment that can be easily transferred to heirs
Conclusion
Delaware Statutory Trusts (DSTs) provide a unique investment structure that offers passive real estate ownership, tax deferral benefits through 1031 exchanges, and access to institutional-grade properties. While DSTs come with certain restrictions, they are an excellent option for investors looking to participate in real estate without the burdens of direct ownership. As interest in tax-efficient real estate strategies continues to grow, DSTs remain a popular and effective solution for both individual and institutional investors.