deferred sales trust
Deferred Sales Trust
A Deferred Sales Trust (DST) is a financial strategy that allows individuals to postpone paying taxes on the sale of a highly valued property, such as real estate or a business, by transferring the proceeds of the sale into a trust. The trust can then invest the funds and produce income, which can be distributed to the trust beneficiaries over time.
The main advantage of a DST is that it can significantly lower the taxes due on the sale of the asset. Additionally, the trust can provide a source of income for the trust beneficiaries, which can be used to support retirement income or other financial objectives.
It's worth noting that DSTs are complex financial instruments and require proper planning and professional guidance to ensure they are set up correctly and that all legal and tax requirements are met. DSTs are not suitable for everyone and it's advisable to consult a financial advisor or tax professional to determine if a DST is the right strategy for your individual situation.
In summary, DSTs can be a useful tool for individuals looking to defer taxes on the sale of a highly valued property and generate income for their beneficiaries over time. But it's important to consult with an expert and understand the complexity of the instrument before making a decision.
Deferred Sales Trust Vs. 1031 Exchange
A Deferred Sales Trust (DST) and a 1031 Exchange are both financial strategies that can be used to delay paying taxes on the sale of a highly valued asset, like real estate. But, there are some significant distinctions between the two.
A 1031 Exchange, often referred to as a "like-kind exchange," enables an individual to sell a property and then buy a "like-kind" property of equal or greater value, while postponing the payment of capital gains taxes on the sale of the original property. This can be a valuable approach for those looking to swap one investment property for another without paying taxes on the sale of the initial property.
On the other hand, a Deferred Sales Trust (DST) allows an individual to sell a property and then transfer the proceeds of the sale into a trust. The trust can then invest the funds and produce income, which can be distributed to the trust beneficiaries over a period of time. The main difference is that with a DST the individual is not obligated to purchase a "like-kind" property, and the funds can be invested in different assets and generate income for the trust beneficiaries.
In summary, a 1031 Exchange enables an individual to delay taxes on the sale of a property by purchasing another "like-kind" property, while a DST allows an individual to postpone taxes on the sale of a property by transferring the proceeds into a trust that can generate income for the trust beneficiaries.
We are hear to help you learn more about either strategy and how it could either plan could improve your financial situations.