What Is the Delaware Statutory Trust Act (DSTA)?
Trusts are widely used in estate planning, and some types of trusts have added characteristics that make them advantageous for investors. One of these categories is the Delaware Statutory Trust (DST), which came to be thanks to the Delaware Statutory Trust Act (DSTA). This piece of legislation provided a legal structure that offers flexibility, liability protection, and tax advantages for investors.
Are Delaware Statutory Trusts (DSTs) Safe?
Investing in a Delaware Statutory Trust is a common strategy for accredited investors, especially those undergoing 1031 exchanges that want to enjoy passive involvement. However, there are still plenty who have their misgivings and doubts regarding the safety of this investment. Are Delaware Statutory Trusts safe? If the sponsor and investors follow IRS rules, conduct due diligence, and plan ahead of time, they may offer certain investor protections. However, like all investments, they carry risks that should be carefully considered.
How Often Are Delaware Statutory Trust (DST) Distributions?
Joining a Delaware Statutory Trust (DST) helps you defer capital gains taxes and potentially earn income if the property makes a profit. Given the structure of DSTs and rules set by Revenue Ruling 2004-86, sponsors must distribute the income to investors on a current basis. In other words, you receive money on a regular frequency. Knowing this schedule is important for effectively managing your cash flow and financial planning.
Delaware Statutory Trust Tax Reporting: Rules & Compliance
Entering a Delaware Statutory Trust (DST) as part of your 1031 Exchange strategy is a great way to preserve your capital gains and diversify your portfolio. This can help investors defer capital gains taxes while gaining access to institutional-grade real estate. However, even though you may defer capital gains taxes, a DST does not eliminate all tax obligations. There are still other obligations you’ll need to address to avoid IRS scrutiny, penalties, and possible removal of your tax-deferred status.
How to Evaluate a DST Broker
Joining a Delaware Statutory Trust (DST) can be a tax-deferred strategy for real estate investors using a 1031 exchange. By buying fractional interests using proceeds from a 1031 exchange, you may defer capital gains taxes and potential for passive income from institutional-grade assets. Since you don’t have direct property ownership, you can also enjoy a more hands-off involvement in the DST.
Considerations With Delaware Statutory Trusts
Delaware Statutory Trusts (DSTs) are a type of legal structure that allows investors to own a fractional interest in a legal entity that holds income-generating real estate. For those who are undergoing a 1031 exchange, investing your proceeds into a DST is a qualified strategy that lets you defer capital gains taxes.
