With all the different investment vehicles available, it can be difficult to decide which one is right for you. If you’re considering a Delaware Statutory Trust (DST), it’s important to learn the facts about this type of investment before making a decision. Without proper planning, a DST can have some serious drawbacks.
What is a Delaware Statutory Trust?
A DST is a type of business trust that is created under Delaware state law. This legal structure allows investors to pool their money together to purchase real estate or other types of property. The trustee of the trust holds title to the property and manages it on behalf of the investors.
One of the main advantages of investing in a DST is that it can provide tax benefits. The trust itself is not taxed on its income, and the income from the trust property is passed through to the investors. This can save you money on your taxes if you invest in a DST that owns income-producing property.
Another advantage of a DST is that it can offer greater flexibility than other types of investments. For example, you can choose to receive distributions from the trust property in the form of cash or units of ownership in the trust. This can give you more control over how you use your investment income.
However, there are also some disadvantages to investing in a DST. One of the biggest is that you may not have as much control over the property as you would if you owned it outright. The trustee of the trust has a fiduciary responsibility to all of the investors, so they may make decisions that you don’t agree with.
Another downside of a DST is that it can be difficult to sell your interest in the trust. Because the trust owns the property, you would need to find a buyer who is willing to purchase your units of ownership in the trust. This can be difficult and time-consuming, especially if the property is not located in a desirable area.
Should I Obtain Professional Guidance?
With all of the risks and complexities involved in investing in a DST, it’s important to seek professional guidance before making a decision. A financial advisor can help you understand the pros and cons of this type of investment and whether it’s right for you.
The benefits of seeking professional guidance include:
You’ll have access to expert knowledge: A financial advisor can help you understand the complex legal and tax implications of investing in a DST. They can also explain the risks and potential rewards of this type of investment.
You’ll get an unbiased opinion: Because financial advisors are not associated with any particular company or product, they can give you unbiased advice. This is important when you’re making a decision about something as important as your investment portfolio.
You can focus on other things: When you work with a financial advisor, you can free up your time to focus on other things. This is especially helpful if you have a busy lifestyle.
How Do I Know if a Financial Advisor is Right for Me?
Not all financial advisors are created equal. It’s important to find one that you can trust and that has your best interests in mind. Here are a few things to look for when choosing a financial advisor:
Check their credentials: Make sure the financial advisor you’re considering is properly credentialed. They should have a designation such as Certified Financial Planner (CFP) or Registered Investment Advisor (RIA).
Ask about their experience: Find out how long the financial advisor has been in business. It’s also a good idea to ask about their specific experience with investing in Delaware Statutory Trusts.
Check their fees: Be sure to ask about the financial advisor’s fees before you make a decision. Some advisors charge by the hour, while others charge a percentage of assets under management.
Get a second opinion: If you’re unsure about whether a financial advisor is right for you, it’s always a good idea to get a second opinion. You can ask another financial advisor for their opinion or consult with a lawyer or accountant.
The Bottom Line
Investing in a Delaware Statutory Trust can be a good way to save on taxes and create a stream of income. However, there are also some risks and complexities involved. Before making a decision, it’s important to seek professional guidance to ensure that this type of investment is right for you.
Don’t hesitate to contact our office for a free consultation on whether a Delaware Statutory Trust is right for your investment portfolio.