The Realized Team’s Picks
Insurance in DSTs: Property, Liability, and Business Interruption—Who’s Covered?
Delaware Statutory Trusts (DSTs) have seen increased demand as of late, thanks to benefits like tax-deferral, passive income, and enhanced diversification. Beyond these advantages, investors find DSTs attractive because of their robust security measures. One element of this security is insurance, which provides an additional cushion if any financial issues arise.
DSTs as a Backup Identification Strategy: Disaster Extensions, Fail-Safes, and Practical Steps
A 1031 exchange is a powerful tool for tax deferral, but the IRS has strict deadlines and rules you must follow. One of these rules is the 45-day identification period for replacement properties, which can make acquiring a suitable replacement property challenging. Thankfully, you can use a Delaware Statutory Trust (DST) as a backup strategy to help you maintain your tax-deferred status. Below, Realized 1031 shares how.
Laddering DST Maturities to Manage Reinvestment and Interest-Rate Risk
Today, many passive investors undergoing 1031 exchanges use Delaware Statutory Trusts (DSTs) to complete the transaction. These investment vehicles provide key advantages like professional management, hands-off involvement, and access to institutional-grade assets.
Using Multiple DSTs to Satisfy the 3-Property and 200% Identification Rules
If investors choose to invest through a 1031 exchange for the tax-deferral benefits, they'll need to understand the many rules that govern the transaction. One of these rules is the 45-day identification period, which is further complicated by the minimum number of properties they are required to identify. Thankfully, Delaware Statutory Trusts (DSTs) have features that help investors easily satisfy these requirements.
Tenant Default in a Single-Tenant DST: Lease Remedies, Cash Flow Interruption, and Investor Protections
Various arrangements can occur in a Delaware Statutory Trust (DST), but the passive income and tax-deferral benefits remain the same. One of these structures is the single-tenant DST, which is when the trust owns an asset with a single financially strong tenant. While this arrangement offers stable income and requires less burdensome oversight, tenant default remains a risk that could result in cash flow interruption if it occurs.
Master Tenant vs. Delaware Trustee: Who Does What in a DST?
As you enter a Delaware Statutory Trust (DST) for tax-deferral and diversification benefits, you’ll learn lots of specifics, like the concept of the master tenant and the DST trustee. You may find these terms confusing because of their similarities, but the master tenant and trustee are two totally distinct parties. Knowing the differences helps you understand how your investment is managed and protected.
Bankruptcy-Remote Structures in DSTs: How Investor Liability Is Isolated
Many modern investors find Delaware Statutory Trusts (DSTs) appealing because they offer tax-deferral benefits and diversification without the headaches of hands-on management. Beyond these well-known benefits, these investments also follow a bankruptcy-remote structure that helps protect investors from liabilities tied to sponsors and other investors.
Understanding ‘Prohibited Activities’ Under Revenue Ruling 2004-86
Delaware Statutory Trusts (DSTs) became eligible for 1031 exchanges under Revenue Ruling 2004-86, which outlined the structure of qualified DSTs. The decree also mandated prohibited activities that would disqualify the DST from tax-deferral benefits. These so-called “seven deadly sins” are mostly a concern for DST sponsors, but knowing them as an investor helps you evaluate the compliance and long-term stability of the DST investment. Realized 1031 goes in-depth about these prohibited activities below.
Why DSTs Don’t Do Capital Calls (and How Sponsors Manage Major Repairs)
Investors find Delaware Statutory Trusts (DSTs) appealing because the structure allows for hands-off involvement, enhanced diversification, and tax deferral through 1031 exchanges. The same structure that provides these advantages, however, creates certain limitations, such as the fact that DSTs cannot make capital calls to address repairs and other contingencies.
