Deferred Sales Trust (DST) – a tool that allows you to legally defer your taxes 10+ years
Those of us who own businesses, corporations, and commercial or residential investment real estate assets are often reluctant to sell because of capital gains taxes associated with the sale. But what other choice do we have other than a property exchange directed by a Qualified Intermediary? Is there another way to deal with the capital gains tax deficits that so many investors experience when they sell their real estate assets? The answer may lie in the Deferred Sales Trust™.
This capital gains tax deferral tool could save you thousands of dollars, and at the same time, you would then have the opportunity to potentially make a profit on the money you would have paid to Uncle Sam in the year of the sale. Obviously, this strategy is gaining popularity among those who have highly appreciated assets that are marked for sale. You, too, can potentially take advantage of this program once you understand how it works.
The process starts when a property owner sells their property to a trust owned by a third-party company. The trust sells the property or stock. Next, the trust “pays” you. The payment isn’t in cash, but with a payment contract called an “installment contract.” The contract promises to make payments to you over an agreed period of time. There are zero taxes to the trust on the sale since the trust “purchased” the property from you for what it sold it for. The payment is made with an installment contract which makes payments to you over an agreed period of time.
The options on when and how payments can be made are flexible. You may have other income and don’t need the payments right away. The tax code doesn’t require payment of the capital gains until you start receiving installment payments. The capital gains tax is paid to the IRS with an “installment plan” since only that portion of capital gains is due in proportion to the number of years established in the term of the installment agreement.
The Deferred Sales Trust™ has the potential to generate more money over the long run than a direct and taxed sale.
For a FREE tax savings analysis on your event/sale please complete the form below
A member of our team will schedule a call with you to review the results of our analysis & to discuss if there is a more suitable or appropriate tax structure depending on your circumstance, so let’s start by taking a look at the details of your transaction!
FAQs & Most Common Questions
I want to learn more before I make any moves - what do I do?
There are lots of ways to learn more!
- We offer webinars frequently on the topic (you can register for one here: dst4me.com)
- You can schedule an intro call to learn more and do a mini Q&A session to get the conversation started (book here-call) (book here-video conf)
- We have flyers & educational materials for you (and for you to share with your other professional advisers to review (CPA, Attorney, Etc.))
How can I know the amount of my payments from the trustee?
The payments are based on what you, the Seller/Taxpayer, arrange and pre-negotiate with the DST Trained and Approved Trustee. Depending on your income goals and other objectives, the amount and length of term of the installment sales note are your choice and subject to your 100% agreement.
What happens if I die?
With proper estate planning (i.e., by creating a Living Trust) scheduled installment note payments otherwise due to you can continue to pay to your legal heirs pursuant to the note term that you have chosen.
Are there any flexibilities or variability in the payment stream, such as increasing the payments over time?
Yes. The DST Trained and Approved Trustee, in his/her absolute discretion, may allow you to refinance your installment sales note in order to extend or shorten the note term or to provide you with payments (or greater payments) of principal (and should you decide to take an “interest only” note initially).
Can I cancel the whole deal after a few years and get my money?
If the DST Trained and Approved Trustee deems appropriate, He/She may elect to terminate the installment sales contract. However, you would immediately owe all the taxes, including all unpaid capital gains due from the original sale of the property/capital asset.
What happens if capital gain tax rates are changed after I set up the DST?
Politicians, from time to time, discuss changing capital gain rates. If that happens you would pay the new rate on the capital gains portion of your installment note payment. However, there is usually adequate notice to make a sound financial decision prior to any such change in taxation or tax rates.
Can I use my installment sales note to get back into real estate?
Yes, please contact the team or a duly qualified DST tax professional to discuss this option. We recommend that you work with Professional Advisers who are experienced in trust law, trust asset management and tax law as there are many situations that could “go wrong” if this is not implemented properly.
When the trust sells the property may I keep some of the cash from the sale?
Yes, in that case you would pay taxes only on the capital gain portion of the money which you kept for yourself outside the trust.
How can I have my tax adviser or attorney analyze the Deferred Sales Trust™ strategy?
For detailed technical information, have your CPA/attorney contact us for a full legal and tax cite package. The names Deferred Sale Trust™ and DST are common law trademarked names and are not found in the code. All of the legal and tax authority used in the DST are in the tax code, treasury regulations, cases, or rulings based upon the foundations found within the tax law.
How can I know the amount of my payments from the trustee?
The payments are based on what you, the Seller/Taxpayer, arrange and pre-negotiate with the DST Trained and Approved Trustee. Depending on your income goals and other objectives, the amount and length of term of the installment sales note are your choice and subject to your 100% agreement.
What are the fees involved with this type of strategy?
The fees involved depend on your particular situation (is this real estate? a business sale? crypto-currency sale?), but you can expect a minimum fee of 1.5% of DST assets as a one-time setup fee & .5% of DST assets/year.
I’m interested in finding out if this works for me. What should I do next?
It’s very easy! Your next step is to complete an “illustration request” on-line at: Request my Free DST analysis
Or, you can call and request a “free DST illustration” which will illustrate your particular facts and circumstances surrounding your potential sale as it relates to utilizing the DST. Once you have received the illustration summary, you can then review this information with a trust case manager and share this information with your CPA (if not Tax Goddess) or tax attorney for further review.