--- title: Comparing Deferred Sales Trusts and Delaware Statutory Trusts description: Learn more about comparing deferred sales trusts and delaware statutory trusts. image: https://www.realized1031.com/hubfs/iStock-1720149713-modified-fba5c10e-e449-426f-9ca6-c37c7a7ef670.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # Comparing Deferred Sales Trusts and Delaware Statutory Trusts Posted Jun 12, 2025 ![iS-1720149713](https://www.realized1031.com/hs-fs/hubfs/iStock-1720149713-modified-fba5c10e-e449-426f-9ca6-c37c7a7ef670.jpg?width=3864&height=2174&name=iStock-1720149713-modified-fba5c10e-e449-426f-9ca6-c37c7a7ef670.jpg) Investors exploring tax-deferral strategies for appreciated real estate have several options to consider. Two common approaches are the deferred sales trust and the Delaware Statutory Trust. These are both called DSTs, which may lead to confusion. However, these two tax strategies are distinct and offer different tax deferral methods. In this Delaware Statutory Trust vs. deferred sales trust guide, Realized 1031 breaks down the differences between the two approaches. Learn about the advantages and risks of each approach, which can help investors evaluate which strategies may be worth consideration. ### What Are Delaware Statutory Trusts? A [Delaware Statutory Trust](https://www.realized1031.com/blog/what-is-a-dst-and-how-are-they-used-for-1031-exchanges) is a legal entity that allows multiple investors to hold fractional beneficial interests in a trust that owns income-producing real estate, such as multifamily or commercial properties. Investors pool money into the Delaware Statutory Trust, amassing enough funds for the trust to purchase assets that may otherwise be inaccessible at the individual level. The Delaware Statutory Trust is not only popular because of its accessibility with fractional ownership to properties, but this strategy may also be eligible for 1031 exchanges, providing tax-deferral benefits. As long as the DST follows the structure and rules set by [Revenue Ruling 2004-86](https://www.taxnotes.com/lr/resolve/tax-notes-today-federal/treasury-announces-ruling-on-delaware-statutory-trusts/ynnp), investors can maintain their tax-deferred status and preserve their capital. In terms of the structure, investors have indirect ownership of the underlying property, only owning interests in the trust itself. The sponsor or trustee manages the day-to-day operations, and investors have no active management duties. As a result, DSTs are commonly used by individuals seeking passive ownership and predictable income streams, subject to market and property performance. ### What Are Deferred Sales Trusts? Compared to Delaware Statutory Trusts, [deferred sales trusts](https://www.realized1031.com/blog/deferred-sales-trust-what-it-is-and-how-it-works) involve more flexibility in the type of asset you can sell and the subsequent investment of the proceeds. This type of strategy lets you defer recognition of gain on[ an asset sale by selling through a trust](https://smartasset.com/estate-planning/deferred-sales-trust). This entity, in turn, pays you in increments. While you will still owe taxes, the liability is just spread out, and it may thus be more financially manageable. In terms of structure, the deferred sales trusts involve the buyer, the trust, and the seller. The seller creates the trust (or through a DST trustee company), then transfers the asset to the trust, which then sells it to the buyer. The trust holds the proceeds, and since the seller hasn’t obtained constructive receipt, capital gains taxes remain deferred. Only when you start receiving funds from the trust do you become liable for tax payments. This structure means that you won’t need to begin with a 1031 exchange to enjoy tax-deferral benefits. As a result, deferred sales trusts allow you to sell any type of asset, not just real estate — a key requirement in like-kind exchanges. You can sell stocks, businesses, and bonds through this strategy. It's important to note that Deferred Sales Trusts are not defined or explicitly recognized by the IRS, and their tax treatment may depend heavily on facts, structure, and documentation. As such, investors should proceed with caution and consult qualified legal and tax advisors before pursuing this strategy. ### Potential Advantages of Delaware Statutory Trusts In addition to potential tax-deferral treatment under IRS Revenue Ruling 2004-86, DSTs may [offer the following characteristics](https://www.realized1031.com/blog/what-are-the-pros-and-cons-of-a-deferred-sales-trust): - **Passive Ownership: **For investors who no longer want an active role in day-to-day property management, Delaware Statutory Trusts provide the potential for passive income. The sponsor handles operations and management, so you’ll only have to wait for the distributed income. - **Access to Larger Assets: **As investors pool money, the trust has enough to purchase properties that are usually beyond the reach of a single investor. - **Professional Management: **Sponsors are typically experienced real estate professionals with expertise in managing large and complex properties. Many have resources, networks, and teams that work to help the property reach its full potential and deliver the projected income. - **Diversification: **With the low minimums of Delaware Statutory Trusts, investors can split the proceeds from a home sale into various trusts.  ### Key Risks and Considerations of DST Investments Delaware Statutory Trusts (DSTs) offer certain tax and investment benefits, but they also involve risks, including: - **Illiquidity**: DST interests cannot be sold or redeemed before the trust’s termination. - **Lack of Control:** Investors have no decision-making authority over the property or trust operations. - **Market and Tenant Risk: **Returns depend on property performance, lease income, and market conditions. - **Leverage Risk: **DSTs may use debt, which increases exposure to interest rates and financing risk. - **Tax Risk: **1031 exchange treatment is based on IRS rules that may change; tax deferral is not guaranteed. ### Potential Advantages of Deferred Sales Trusts There are also advantages that deferred sales trust may offer: - **Tax-deferral Without Like-Kind Requirements: **DSTs do not rely on 1031 exchange rules and may be used outside the traditional real estate context. However, they carry higher legal and audit risks and should be carefully evaluated. - **Broader Asset Eligibility: **DSTs are sometimes used to defer gains from the sale of real estate, businesses, securities, or other capital assets—subject to the legal framework and trust structure**.** - **Steady Cash Flow: **Deferred sales trusts and Delaware Statutory Trusts both offer income on a current basis. However, the returns you receive from the latter are more variable, especially if there’s market volatility. Deferred sales trusts, on the other hand, provide fixed income as the trust distributes your money from the sale. - **Risk Management: **A deferred sales trust allows you to maintain greater control over the timing and amount of income received, allowing for tax and risk planning. ### **Key Risks of Deferred Sales Trusts** While Deferred Sales Trusts (DSTs) may offer tax deferral and investment flexibility, they carry important risks: - **Not IRS-Recognized**: DSTs are not formally endorsed by the IRS and rely on installment sale provisions under IRC §453. - **Audit and Compliance Risk**: Improper structuring may result in loss of tax deferral, triggering immediate tax liability. - **Legal and Administrative Complexity**: These strategies require specialized legal and tax structuring. - **Investment Risk**: Income depends on how trust assets are invested; returns are not guaranteed. - **Limited IRS Guidance**: There is minimal official IRS or court precedent supporting the structure. ### Exploring Tax Deferral Strategies That Align With Your Goals There are multiple factors to keep in mind when choosing between the deferred sales trust and the Delaware Statutory Trust. In particular, you’ll want to factor in the involvement of 1031 exchanges. If you’re fine with the requirements in order to enjoy tax deferral, the Delaware Statutory Trusts are great. However, those who would like more flexibility or have assets that aren’t real property will find deferred sales trusts more suitable. Another consideration is the level of control and customization you desire. While Delaware Statutory Trusts are more passive and structured, deferred sales trusts allow for personalized payment plans and investment strategies tailored to your financial goals. ### Wrapping Up: Deferred Sales Trust vs. Delaware Statutory Trust While sharing the same DST acronym, deferred sales trusts and Delaware Statutory trusts are different investment strategies. One allows you to defer taxes through 1031 exchanges, while the other lets you delay payments. Whichever you choose, make sure to determine whether the structure, benefits, and risks offered by either one align with your needs, risk tolerance, and investment goals. *The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.* *Article written by: Story Amplify. Story Amplify is a marketing agency that offers services such as copywriting across industries, including financial services, real estate investment services, and miscellaneous small businesses.* **Sources: ** [https://delcode.delaware.gov/title12/c038/sc01/](https://delcode.delaware.gov/title12/c038/sc01/) [https://www.taxnotes.com/lr/resolve/tax-notes-today-federal/treasury-announces-ruling-on-delaware-statutory-trusts/ynnp](https://www.taxnotes.com/lr/resolve/tax-notes-today-federal/treasury-announces-ruling-on-delaware-statutory-trusts/ynnp) [https://smartasset.com/estate-planning/deferred-sales-trust](https://smartasset.com/estate-planning/deferred-sales-trust) Download The Guide To DSTs [![The Investor's Guidebook To DSTs](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/DST-eBook-250.png?width=250&height=250&name=DST-eBook-250.png "See if Delaware Statutory ...") ](https://www.realized1031.com/blog/comparing-deferred-sales-trusts-and-delaware-statutory-trusts#blogform) Download eBook ---   --- ### The Investor's Guidebook To DSTs ![Download The Guide To DSTs](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/DST-eBook-550.jpg?width=550&height=650&name=DST-eBook-550.jpg) See if Delaware Statutory Trusts are right for you. By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received. Search ### [Why Realized](https://www.realized1031.com/why-realized) - [Wealth Management](https://www.realized1031.com/the-wealth-management-gap) - [Why Realized](https://www.realized1031.com/why-realized) - [Our Process](https://www.realized1031.com/how-realized-works) - [Scenarios](https://www.realized1031.com/scenarios) - [Private Client Program](https://www.realized1031.com/private-client) - [Realized Exchange Services](https://www.realized1031.com/realized-exchange-services) ### [The Company](https://www.realized1031.com/about-us) - [The Team](https://www.realized1031.com/about-us) - [FAQ](https://www.realized1031.com/frequently-asked-questions) - [Testimonials](https://www.realized1031.com/testimonials) - [Press](https://www.realized1031.com/press) - [Careers](https://www.realized1031.com/careers) ### [Partners](https://www.realized1031.com/partners) - [Financial Advisors](https://www.realized1031.com/advisor) - [Broker Dealers](https://www.realized1031.com/partners/broker-dealers) - [Real Estate Agents](https://www.realized1031.com/partners/real-estate-agents) - [Certified Public Accountants](https://www.realized1031.com/partners/certified-public-accountants) ### [Resources](https://www.realized1031.com/resources) - #### Learn - [Articles](https://www.realized1031.com/blog) - [Glossary of Terms](https://www.realized1031.com/glossary) - [Capital Gains Tax Rates](https://www.realized1031.com/capital-gains-tax-rate) - #### Watch - [Video Library](https://www.realized1031.com/videos) - [Webinar Archive](https://www.realized1031.com/webinars) - #### Read - [Delaware Statutory Trust](https://www.realized1031.com/delaware-statutory-trust) - [Tenants-In-Common](https://www.realized1031.com/tenants-in-common-tic) - [1031 Exchange](https://www.realized1031.com/1031-exchange) - [Qualified Intermediary](https://www.realized1031.com/qualified-intermediary) - [Qualified Opportunity Zones](https://www.realized1031.com/opportunity-zones) #### Realized - 500 W 13th Street Austin, TX 78701 - (877) 797-1031 ##### [Contact Us](https://www.realized1031.com/contact-us) - [![Realized on Facebook](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-facebook-whiterev.png?width=60&height=60&name=social-facebook-whiterev.png)](https://www.facebook.com/Realized/) - [![Realized on LinkedIn](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-linkedin-whiterev.png?width=60&height=60&name=social-linkedin-whiterev.png)](https://www.linkedin.com/company/realized/) - [![Realized on YouTube](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-youtube-whiterev.png?width=60&height=60&name=social-youtube-whiterev.png)](https://www.youtube.com/c/Realized1031?sub_confirmation=1) - [![Realized Holdings, Inc. BBB Business Review](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/bbb/RZH2-bbb-seal.png?width=40&height=65&name=RZH2-bbb-seal.png)](http://www.bbb.org/central-texas/business-reviews/real-estate-investors/realized-holdings-llc-in-austin-tx-1000112948/#bbbonlineclick) - [![FEA Logo](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/fea/RZH2-fea-logo.png?width=82&height=65&name=RZH2-fea-logo.png "FEA Logo")](https://www.1031.org) SECURITIES DISCLOSURE Realized1031.com is a website operated by Realized Technologies, LLC, a wholly owned subsidiary of Realized Holdings, Inc. (“Realized Holdings”). Securities and/or Investment Advisory Services may be offered through Registered Representatives or Investment Advisor Representatives of Realized Financial, Inc. ("Realized"), a broker/dealer, member [FINRA](https://www.finra.org)/[SIPC](https://www.sipc.org/), and registered investment adviser. Realized is a subsidiary of Realized Holdings, Inc. ("Realized Holdings"). Check the background of this firm on [FINRA's BrokerCheck](https://brokercheck.finra.org/firm/summary/22333). Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested. This site is published for residents of the United States who are accredited investors only. Registered Representatives and Investment Advisor Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every representative listed. For additional information, please contact the Realized Compliance department at 512-472-7171 or info@realized1031.com. - [Terms & Conditions](https://www.realized1031.com/terms-and-conditions) - [Privacy Policy](https://www.realized1031.com/privacy-policy) - [Form CRS](https://www.realized1031.com/hubfs/common-files/disclosures/FormCRS.pdf) - [ADV 2A](https://www.realized1031.com/hubfs/common-files/disclosures/ADV2A.pdf) - [Reg BI Disclosures](https://www.realized1031.com/hubfs/common-files/disclosures/RegBI.pdf) -   © 2026 Realized Holdings, Inc. ```json { "@context" : "http://schema.org/", "@type" : "BlogPosting", "articleBody" : "Investors exploring tax-deferral strategies for appreciated real estate have several options to consider. Two common approaches are the deferred sales trust and the Delaware Statutory Trust. These are both called DSTs, which may lead to confusion. However, these two tax strategies are distinct and offer different tax deferral methods. In this Delaware Statutory Trust vs. deferred sales trust guide, Realized 1031 breaks down the differences between the two approaches. Learn about the advantages and risks of each approach, which can help investors evaluate which strategies may be worth consideration. What Are Delaware Statutory Trusts? A Delaware Statutory Trust is a legal entity that allows multiple investors to hold fractional beneficial interests in a trust that owns income-producing real estate, such as multifamily or commercial properties. Investors pool money into the Delaware Statutory Trust, amassing enough funds for the trust to purchase assets that may otherwise be inaccessible at the individual level. The Delaware Statutory Trust is not only popular because of its accessibility with fractional ownership to properties, but this strategy may also be eligible for 1031 exchanges, providing tax-deferral benefits. As long as the DST follows the structure and rules set by Revenue Ruling 2004-86, investors can maintain their tax-deferred status and preserve their capital. In terms of the structure, investors have indirect ownership of the underlying property, only owning interests in the trust itself. The sponsor or trustee manages the day-to-day operations, and investors have no active management duties. As a result, DSTs are commonly used by individuals seeking passive ownership and predictable income streams, subject to market and property performance. What Are Deferred Sales Trusts? Compared to Delaware Statutory Trusts, deferred sales trusts involve more flexibility in the type of asset you can sell and the subsequent investment of the proceeds. This type of strategy lets you defer recognition of gain on an asset sale by selling through a trust. This entity, in turn, pays you in increments. While you will still owe taxes, the liability is just spread out, and it may thus be more financially manageable. In terms of structure, the deferred sales trusts involve the buyer, the trust, and the seller. The seller creates the trust (or through a DST trustee company), then transfers the asset to the trust, which then sells it to the buyer. The trust holds the proceeds, and since the seller hasn’t obtained constructive receipt, capital gains taxes remain deferred. Only when you start receiving funds from the trust do you become liable for tax payments. This structure means that you won’t need to begin with a 1031 exchange to enjoy tax-deferral benefits. As a result, deferred sales trusts allow you to sell any type of asset, not just real estate — a key requirement in like-kind exchanges. You can sell stocks, businesses, and bonds through this strategy. It's important to note that Deferred Sales Trusts are not defined or explicitly recognized by the IRS, and their tax treatment may depend heavily on facts, structure, and documentation. As such, investors should proceed with caution and consult qualified legal and tax advisors before pursuing this strategy. Potential Advantages of Delaware Statutory Trusts In addition to potential tax-deferral treatment under IRS Revenue Ruling 2004-86, DSTs may offer the following characteristics: Passive Ownership: For investors who no longer want an active role in day-to-day property management, Delaware Statutory Trusts provide the potential for passive income. The sponsor handles operations and management, so you’ll only have to wait for the distributed income. Access to Larger Assets: As investors pool money, the trust has enough to purchase properties that are usually beyond the reach of a single investor. Professional Management: Sponsors are typically experienced real estate professionals with expertise in managing large and complex properties. Many have resources, networks, and teams that work to help the property reach its full potential and deliver the projected income. Diversification: With the low minimums of Delaware Statutory Trusts, investors can split the proceeds from a home sale into various trusts. Key Risks and Considerations of DST Investments Delaware Statutory Trusts (DSTs) offer certain tax and investment benefits, but they also involve risks, including: Illiquidity: DST interests cannot be sold or redeemed before the trust’s termination. Lack of Control: Investors have no decision-making authority over the property or trust operations. Market and Tenant Risk: Returns depend on property performance, lease income, and market conditions. Leverage Risk: DSTs may use debt, which increases exposure to interest rates and financing risk. Tax Risk: 1031 exchange treatment is based on IRS rules that may change; tax deferral is not guaranteed. Potential Advantages of Deferred Sales Trusts There are also advantages that deferred sales trust may offer: Tax-deferral Without Like-Kind Requirements: DSTs do not rely on 1031 exchange rules and may be used outside the traditional real estate context. However, they carry higher legal and audit risks and should be carefully evaluated. Broader Asset Eligibility: DSTs are sometimes used to defer gains from the sale of real estate, businesses, securities, or other capital assets—subject to the legal framework and trust structure. Steady Cash Flow: Deferred sales trusts and Delaware Statutory Trusts both offer income on a current basis. However, the returns you receive from the latter are more variable, especially if there’s market volatility. Deferred sales trusts, on the other hand, provide fixed income as the trust distributes your money from the sale. Risk Management: A deferred sales trust allows you to maintain greater control over the timing and amount of income received, allowing for tax and risk planning. Key Risks of Deferred Sales Trusts While Deferred Sales Trusts (DSTs) may offer tax deferral and investment flexibility, they carry important risks: Not IRS-Recognized: DSTs are not formally endorsed by the IRS and rely on installment sale provisions under IRC §453. Audit and Compliance Risk: Improper structuring may result in loss of tax deferral, triggering immediate tax liability. Legal and Administrative Complexity: These strategies require specialized legal and tax structuring. Investment Risk: Income depends on how trust assets are invested; returns are not guaranteed. Limited IRS Guidance: There is minimal official IRS or court precedent supporting the structure. Exploring Tax Deferral Strategies That Align With Your Goals There are multiple factors to keep in mind when choosing between the deferred sales trust and the Delaware Statutory Trust. In particular, you’ll want to factor in the involvement of 1031 exchanges. If you’re fine with the requirements in order to enjoy tax deferral, the Delaware Statutory Trusts are great. However, those who would like more flexibility or have assets that aren’t real property will find deferred sales trusts more suitable. Another consideration is the level of control and customization you desire. While Delaware Statutory Trusts are more passive and structured, deferred sales trusts allow for personalized payment plans and investment strategies tailored to your financial goals. Wrapping Up: Deferred Sales Trust vs. Delaware Statutory Trust While sharing the same DST acronym, deferred sales trusts and Delaware Statutory trusts are different investment strategies. One allows you to defer taxes through 1031 exchanges, while the other lets you delay payments. Whichever you choose, make sure to determine whether the structure, benefits, and risks offered by either one align with your needs, risk tolerance, and investment goals. The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation. Article written by: Story Amplify. Story Amplify is a marketing agency that offers services such as copywriting across industries, including financial services, real estate investment services, and miscellaneous small businesses. Sources: https://delcode.delaware.gov/title12/c038/sc01/ https://www.taxnotes.com/lr/resolve/tax-notes-today-federal/treasury-announces-ruling-on-delaware-statutory-trusts/ynnp https://smartasset.com/estate-planning/deferred-sales-trust", "articleSection" : [ "Delaware Statutory Trusts (DST)" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2025-06-12T14:00:00+0000", "datePublished" : "2025-06-12T14:00:00+0000", "description" : "Learn more about comparing deferred sales trusts and delaware statutory trusts.\n", "headline" : "Comparing Deferred Sales Trusts and Delaware Statutory Trusts", "image" : { "@type" : "ImageObject", "height" : 2174, "url" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/iStock-1720149713-modified-fba5c10e-e449-426f-9ca6-c37c7a7ef670.jpg", "width" : 3864 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/comparing-deferred-sales-trusts-and-delaware-statutory-trusts", "name" : "Comparing Deferred Sales Trusts and Delaware Statutory Trusts", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/iStock-1720149713-modified-fba5c10e-e449-426f-9ca6-c37c7a7ef670.jpg" } ```