Table of Contents
Many investors are not aware of the potential benefits that come from using Delaware Statutory Trusts (DST) for estate planning purposes. It’s common for these professionals to assume that DSTs are only useful for 1031 exchanges. However, DSTs can offer a number of estate planning benefits that make them worth considering.
In this article, we’ll cover the basics of 1031 exchanges, Delaware Statutory Trusts, and how they can be used for estate planning. We’ll also touch on the top 5 benefits of utilizing DSTs for estate planning purposes.
What is a 1031 Exchange?
A 1031 exchange is a way to defer capital gains taxes on the sale of an investment property by reinvesting the proceeds into another “like-kind” property. In order to qualify for this tax treatment, the investor must adhere to a number of strict rules and regulations set forth by the IRS.
The most important rule to remember is that the investor must reinvest all of the proceeds from the sale of the first property into the second property. If even a single dollar is taken out as cash, the entire transaction will be taxed as a sale.
In order to complete a 1031 exchange, the investor must work with a qualified intermediary (QI). The QI is a third party that holds the proceeds from the sale of the first property and then disburses them to the seller of the second property.
The 1031 exchange process can be quite complex, and it’s important to work with experienced professionals in order to ensure that everything is done correctly.
What is a Delaware Statutory Trust?
A Delaware Statutory Trust (DST) is a type of business trust that is governed by Delaware state law. DSTs are often used as a way to avoid purchasing a replacement property and instead put the funds into a trust. This allows investors to avoid the hassles and paperwork associated with owning a property. There are no capital gains taxes due on the sale of a property held in a DST.
DSTs are also popular because they offer asset protection and estate planning benefits. For example, if an investor dies while owning a property in a DST, the trust can continue to hold the property and manage it according to the terms of the trust agreement. This can be a helpful way to manage property for future generations.
Top 5 Benefits of Utilizing Delaware Statutory Trusts for Estate Planning
1. DSTs Offer Asset Protection
One of the biggest benefits of using DSTs for estate planning is that they offer asset protection. If an investor dies while owning a property in a DST, the trust can continue to hold the property and manage it according to the terms of the trust agreement. This can be a helpful way to manage property for future generations.
2. DSTs Offer Flexibility
Another benefit of using DSTs for estate planning is that they offer flexibility. DSTs can be structured in a variety of ways to meet the unique needs of the investor. For example, an investor can choose to have the trust distribute income to beneficiaries on a monthly or annual basis. Or, the investor can choose to have the trust hold the property for a specific period of time before it is distributed.
3. DSTs Are Easy to Set Up
Another benefit of using DSTs for estate planning is that they are easy to set up. Unlike other types of trusts, there is no need to go through the hassle and expense of setting up a separate legal entity. All that is required is a simple trust agreement between the investor and the trustee.
4. DSTs Offer Tax Benefits
Another benefit of using DSTs for estate planning is that they offer tax benefits. DSTs are exempt from capital gains taxes. This means that an investor can sell a property held in a DST and defer all of the capital gains taxes until the trust is terminated.
5. DSTs Are Cost-Effective
Another benefit of using DSTs for estate planning is that they are cost-effective. DSTs can be set up with a minimum investment of just $5,000. This makes them an attractive option for investors who do not have a lot of money to invest.
DSTs offer a number of benefits that make them an attractive option for estate planning. These benefits include asset protection, flexibility, easy set-up, tax benefits, and cost-effectiveness. Investors who are looking for a way to defer capital gains taxes and protect their assets should consider using DSTs for their estate planning needs.
Our team of dedicated professionals can help you set up a DST that meets your specific needs. Contact us today to learn more about how we can help you take advantage of the benefits of using DSTs for estate planning.