--- title: What Are the Delaware Statutory Trust (DST) Trustee Requirements? description: A DST must have a trustee based in Delaware but can also have a managing or signatory trustee elsewhere. image: https://www.realized1031.com/hubfs/DSTiStock-989117546.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** # What Are the Delaware Statutory Trust (DST) Trustee Requirements? Posted Dec 4, 2023 ![What Are the Delaware Statutory Trust (DST) Trustee Requirements?](https://www.realized1031.com/hubfs/DSTiStock-989117546.jpg) A Delaware Statutory Trust ([DST](https://www.realized1031.com/delaware-statutory-trust)) is a prepackaged, professionally managed, passive real estate investment option for accredited investors. DSTs often have relatively low minimums, but they are illiquid, with holding periods typically ranging from five to ten years. DSTs allow taxpayers to enter and exit using the IRS Section 1031 exchange, which is an attractive feature for many investors. The DST may also provide tax-advantaged income since DSTs are pass-through entities, and the income must be regularly distributed to investors rather than reinvested. The DST assets might include multifamily housing, industrial facilities, office complexes, and other commercial real estate choices. In some cases, the assets may be of higher quality. One of the reasons why DSTs are unique is that Delaware is one of the few states with a statutory trust law, which delegates more control to the parties of an agreement. In contrast, most states use common trust laws with more restrictive rules. Statutory trusts allow greater privacy and authorize the specifics of the trust agreement to remain unfiled, maintaining information about the contract details within the circle of the parties to it. ### What are the DST trustee requirements? Delaware Statutory Trusts (DSTs) must have at least one trustee who is a resident of Delaware or has their principal place of business in Delaware. There are some exceptions to this requirement, but they are limited. The[ signatory trustee](https://www.realized1031.com/glossary/signatory-trustee) oversees the trust and hires a sponsor to manage the DST, usually with the help of a master tenant. The signatory and Delaware trustees may be the same or different persons or entities. A Delaware-based trust company or Delaware corporation can serve as the Delaware-based trustee. Typically, there is also an independent trustee representing the lender’s interests or those of the beneficiaries. Beneficiaries can potentially act as trustees, but this scenario is unusual. Typically, beneficiaries don’t have input into trust management or operations. The beneficiary may prefer this passive participation. The shareholders should also be aware that[ DSTs are not liquid](https://www.realized1031.com/blog/what-are-the-responsibilities-and-duties-of-dst-trusties-and-beneficiaries), and they can’t count on being able to dispose of their investment before maturity, which is usually between 5 and 10 years. The trust structure protects the beneficiaries from the trust’s creditors and protects the trust from the beneficiaries’ creditors. The trust owns the assets, and the beneficiaries own undivided fractional shares of the trust. ### How are trustee actions restricted? First, the[ trustees have a fiduciary duty,](https://www.realized1031.com/blog/what-are-the-fiduciary-duties-involved-with-delaware-statutory-trust-dst-investment) including the duties of care and loyalty, meaning that they act in good faith with the belief that the actions they approve are in the best interests of the shareholders (beneficiaries). Furthermore, trustees may not use trust income to buy additional property or to improve the existing assets (although they can direct income to necessary maintenance and repairs). Trustees can’t seek additional investors once the offering is closed and can’t renegotiate loans or leases for better terms. The restriction on lease negotiation is one reason that the trustee typically engages a master tenant, who can oversee subleases with the tenants.    *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.* *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 investments have an inherent level of risk. The value of your investment will fluctuate with the value of the underlying investments. You could receive back less than you initially invested and there is no guarantee that you will receive any income.* *No public market currently exists, and one may never exist. 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DSTs allow taxpayers to enter and exit using the IRS Section 1031 exchange, which is an attractive feature for many investors. The DST may also provide tax-advantaged income since DSTs are pass-through entities, and the income must be regularly distributed to investors rather than reinvested. The DST assets might include multifamily housing, industrial facilities, office complexes, and other commercial real estate choices. In some cases, the assets may be of higher quality. One of the reasons why DSTs are unique is that Delaware is one of the few states with a statutory trust law, which delegates more control to the parties of an agreement. In contrast, most states use common trust laws with more restrictive rules. Statutory trusts allow greater privacy and authorize the specifics of the trust agreement to remain unfiled, maintaining information about the contract details within the circle of the parties to it. What are the DST trustee requirements? Delaware Statutory Trusts (DSTs) must have at least one trustee who is a resident of Delaware or has their principal place of business in Delaware. There are some exceptions to this requirement, but they are limited. The signatory trustee oversees the trust and hires a sponsor to manage the DST, usually with the help of a master tenant. The signatory and Delaware trustees may be the same or different persons or entities. A Delaware-based trust company or Delaware corporation can serve as the Delaware-based trustee. Typically, there is also an independent trustee representing the lender’s interests or those of the beneficiaries. Beneficiaries can potentially act as trustees, but this scenario is unusual. Typically, beneficiaries don’t have input into trust management or operations. The beneficiary may prefer this passive participation. The shareholders should also be aware that DSTs are not liquid, and they can’t count on being able to dispose of their investment before maturity, which is usually between 5 and 10 years. The trust structure protects the beneficiaries from the trust’s creditors and protects the trust from the beneficiaries’ creditors. The trust owns the assets, and the beneficiaries own undivided fractional shares of the trust. How are trustee actions restricted? First, the trustees have a fiduciary duty, including the duties of care and loyalty, meaning that they act in good faith with the belief that the actions they approve are in the best interests of the shareholders (beneficiaries). Furthermore, trustees may not use trust income to buy additional property or to improve the existing assets (although they can direct income to necessary maintenance and repairs). Trustees can’t seek additional investors once the offering is closed and can’t renegotiate loans or leases for better terms. The restriction on lease negotiation is one reason that the trustee typically engages a master tenant, who can oversee subleases with the tenants. 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. 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 investments have an inherent level of risk. The value of your investment will fluctuate with the value of the underlying investments. You could receive back less than you initially invested and there is no guarantee that you will receive any income. No public market currently exists, and one may never exist. 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