How to Transfer a DST after Passing Away

Posted Jul 4, 2022

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If you own an interest in a Delaware Statutory Trust (DST), you can use it as a wealth transfer tool for future generations. Your DST investments transfer to your designated beneficiaries after you pass away, providing them with the same benefits you had as the original owner.

Learn how to transfer a DST after you pass away and estate planning considerations using your existing DST.

What Is a DST?

A Delaware Statutory Trust (DST) is a real estate investment structure that allows investors to pursue passive income on commercial real estate. DSTs are pre-packaged by a DST sponsor, who buys and manages commercial properties.

DSTs offer individual accredited investors a way to own interest in commercial properties like industrial complexes, apartment complexes, and commercial rental real estate that would otherwise be out of reach. Most DSTs have 500 or fewer investors that split the ownership interest.

Pros and Cons of a DST Investment

DST investments have various pros and cons for investors.

Potential benefits of a DST include:

  •       Quick closing time, especially when using a 1031 exchange to buy-in
  •       Offers access to high-dollar commercial property ownership
  •       Can provide tax-advantaged passive income
  •       Available for a low minimum investment threshold, typically $100,000
  •       Transfers to beneficiaries upon death, similar to other real estate assets

Potential downsides of a DST investment are:

  •       An extended holding period, typically between five and ten years
  •       Generally considered an illiquid investment
  •       No control over decisions regarding property

Considerations for Estate Planning with a DST

When estate planning with your DST in mind, consider the following elements:

Revocable Trust

A DST is a revocable trust and is under the sponsor’s control. This structure means that your beneficiaries will have no control over the timing of sales of the DST property or management decisions. Additionally, they may have to wait until the full holding time has expired to exit the DST.

Capital Gains Tax

You defer capital gains tax when you use a 1031 exchange to buy into a DST. If you transfer your estate DST, the property is valued based on the current market value. Your beneficiaries won’t have to pay capital gains taxes on this stepped-up value or the property you used in the original 1031 exchange.

Passive Income Benefits

A DST allows investors to pursue a passive income without managing a commercial rental property. When you transfer a DST in your estate, your beneficiaries gain the same passive income potential. They can see a passive income without taking on the additional responsibility of managing a property.

How to Leave Your DST to Your Heirs

Work with a financial advisor and estate planning attorney to leave your DST investment with your heirs. A qualified financial advisor can help you develop wealth-building strategies and grow your investment portfolio throughout your lifetime.

An estate planning attorney can help you complete the legal documents necessary to name your beneficiaries and help ensure that your DST transfers to the person or people you designate when you pass away.


This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. No public market currently exists and one may never exist. DST programs are speculative and suitable only for Accredited Investors who do not anticipate a need for liquidity or can afford to lose their entire investment. There is no guarantee that the investment objectives of any particular program will be achieved. The actual amount and timing of distributions paid by programs is not guaranteed and may vary. There is no guarantee that investors will receive distributions or a return of their capital. These programs can give no assurance that it will be able to pay or maintain distributions, or that distributions will increase over time. Costs associated with a 1031 transaction may impact investor’s returns and may outweigh the tax benefits. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities. All real estate investments have the potential to lose value during the life of the investment.

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