Delaware Statutory Trust, or DST, is a separate legal entity formulated around Delaware Statutory Law. DST Investments work as replacement property for real estate investors looking to defer their capital gains taxes using a 1031 exchange tax deferral strategy. It is also an excellent option for investors looking to diversify their real estate portfolio. The DST property ownership structure supports investors with less capital. It allows them to own a partial interest in a professionally managed, large, institutional-grade commercial property along with other investors, as individual owners within a Trust. Each owner is entitled to tax benefits, a percentage share of the cash flow income, and appreciation, if any, of the entire property.

Advantages

Create a valuable inheritance for your heirs

If you wish to create a portfolio of revenue-generating hassle-free investments that will provide for your heirs long after your demise, a DST will be a great option. Similar to other 1031 exchange-qualified investments, your heirs will get a step-up in cost basis when they get your DST assets, and they will not inherit any previous deferred capital gains taxes.

Portfolio diversification

DST allows you to choose the amount you wish to invest, giving you the freedom to invest in multiple DST properties. Furthermore, you can diversify your real estate portfolio.

Receive regular distributions

Delaware Statutory Trusts are authorized to hold cash reserves in case the property demands repairs or faces unforeseen expenses. However, all proceeds and earnings above the reserve amounts must be distributed to the beneficiaries regularly and within the required time frame.

A perfect backup plan for your 1031 exchange

Delaware Statutory Trusts (“DSTs”) are a decent backup plan for 1031 exchange investors. DSTs guarantee that 100% of exchange funds are invested in a replacement property, and the investors defer capital gains taxes.
Always ensure to identify a property within a DST as your third potential replacement property in the given 45 day identification period. If due to any reason you can’t acquire the first two properties, at least you won’t end up paying taxes. DSTs satisfy 1031 exchange requirements, and you will be able to complete your exchange successfully. Even in the cases of boot, DSTs are a desirable option.

Bottom line

DST ownership option precisely extends the same advantages which an investor will welcome as a single large-scale investment property owner but includes no management responsibility. Every DST property asset is administered by property managers and professional investment real estate asset managers. DST turns out to be a lifesaver if you are unable to find suitable replacement properties with the specified 45-day identification period. If you are an investor and you wish to ensure that you earn maximum revenue out of your property, DST should be your first choice.