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Understanding Delaware Statutory Trust (DST) Termination and Liquidation
We’ve written many blogs concerning Delaware Statutory Trusts (DSTs) and potential investment advantages. DSTs are real estate investment vehicles that buy and manage real estate. Through this process, DSTs can offer investors access to institutional properties with a relatively minimal investment.
What is the Role of a Sponsor in a Delaware Statutory Trust?
The Sponsor plays a significant role in creating and managing a Delaware Statutory Trust (DST). In fact, the Sponsor is often the visionary, identifying the target property, acquiring it, arranging for financing, and then managing its operation. A Sponsor might be an individual, private equity firm, or other real estate investment company.
What Are the Typical Holding Requirements for a DST Investment?
DSTs (Delaware Statutory Trusts) are among several attractive options for investors looking for fractional ownership of institutional-quality commercial real estate. Like an LLC or limited partnership, a DST has a sponsoring entity that identifies, acquires, and finances the property or properties. The assets go into the trust, and the investors (called trust beneficiaries) receive a proportionate share of ownership based on their investment amount.
How to Pass Your Delaware Statutory Trust Interests to Your Heirs
For many investors, Delaware Statutory Trusts (DSTs) are a viable way to own real estate without the active management required for direct ownership. In addition, DSTs may provide income and tax advantages. One significant advantage to investing in DSTs is the investor’s ability to use a 1031 exchange to move from direct investment to fractional ownership of commercial property.
How to Evaluate a Delaware Statutory Trust Sponsor
Participating in a Delaware Statutory Trust (DST) is an attractive opportunity for some investors. For example, the investor might be interested in expanding their geographic reach, reducing their active management of property, or transitioning into a different commercial property sector. Each of these goals may be achievable by investing in one or more DSTs.
What Types of Property Can Be Held In a Delaware Statutory Trust?
Delaware Statutory Trusts (DSTs) are investment opportunities in which a group of investors each owns an undivided fractional share of the trust’s properties, which may include any commercial assets. DSTs may own various properties, including retail, multifamily housing, office and industrial, and specialty assets like self-storage and student housing. DSTs are possible due to the statutory trust laws in Delaware, which allow trusts to determine the rights and responsibilities of the trust participants and to protect the trust's assets from debtors of any of the beneficiaries (shareholders).
What Wealth Managers Should Know About DSTs
As a wealth manager, you have a high degree of responsibility in helping your clients manage their financial affairs. Your services typically go beyond investment advice and include estate and trust planning, philanthropy, tax management, and ancillary financial and legal matters. Often, your role includes coordinating the services of other client team members, including accountants.
How Much Does it Cost to Set Up a Delaware Statutory Trust?
Delaware Statutory Trusts are typically created and managed by professional real estate companies that act as the trust’s Sponsor. These companies leverage their expertise and experience to select and acquire various commercial real estate properties to be placed under trust and offered to investors as fractional ownership interests in the trust.
Does a Delaware Statutory Trust File a Tax Return?
Investors who 1031 exchange into Delaware Statutory Trusts (DSTs) may wonder how to address their annual tax reporting requirements from this type of investment vehicle.
What Does a 1031 Delaware Statutory Trust Advisor Do?
Finding suitable Delaware Statutory Trust investments can be challenging. Scouring through multiple DST offerings to find investment options that meet your investment criteria can be a difficult and time-consuming process. DST investors who are trying to place capital to complete 1031 exchanges also face the additional pressure of meeting inflexible Internal Revenue Service deadlines.
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