Deferred Sales Trust (DST) Services
Capital Gains Tax Deferral Solutions to Maximize Your Money & Benefits
What Is a Deferred Sales Trust?
If you own a business or real estate with a large amount of gain and are not selling your property because of capital gain taxes, or can’t find suitable, qualified property exchanges, then you may want to consider a Deferred Sales Trust™ (DST).
The DST utilizes a legal and established method that allows the seller of the property to defer capital gain taxes due at the time of sale over a period of time that is selected by the Seller/Taxpayer in advance.
Deferring taxes legally is not new. Some commonly used tax deferral methods include 1031 exchanges, charitable trusts, and traditional seller carry-back installment sale contracts. Trust law predates the formation of the U.S. law and tax law. Various types of trusts are used by millions of Americans in order to protect and preserve their wealth for themselves and their heirs.
The DST can be used with any kind of entity, e.g., LLC’s, S or C -election corporations, as well as individuals who own real estate, rental properties, vacation homes, commercial properties, hotels, land, industrial complexes, retail developments, and raw land, to name a few.
How Does a Deferred Sales Trust Work?
The process starts with initial due diligence and prospective marketing and market research. If the transaction is viable, the trust and property owner will negotiate terms with regard to the asset(s).
If the transaction is feasible, the property owner, (“Seller/Taxpayer”), selling ownership of the property/capital asset to a dedicated trust (the “Trust”) that is set up specifically for the Seller/Taxpayer and the contemplated transaction.
Significant Benefits to a Seller Using the Deferred Sales Trust™ When Selling Their Asset
- Tax Deferral: When appreciated property/capital assets are sold, capital gains tax on said sale is generally deferred until the Seller/Taxpayer actually receives the payments.
- Estate Tax Benefits: May accomplish an “estate tax freeze” for estate tax purposes.
- Maintain Family Wealth: When properly structured, the principal inside the subject installment sales note can be preserved with “interest only” or partial principal payments creating the potential to pass on a large portion of the note principal to your legal heirs with proper estate planning.
- Estate Liquidity: Converts an illiquid asset into monthly payments.
- Retirement Income: Provides a stream of income that can be used as retirement income.
- Probate Avoidance: With proper estate planning.
- Eliminates Risks Associated with Ownership: By utilizing the DST, you have taken an asset that is otherwise “exposed” or liability prone and converted it to a “no liability” asset.
Extended Wealth Generation
Nothing is required to be given away to charity as happens with the competing strategy known as a Charitable Remainder Trust. The DST allows all due principal and accrued interest to be paid to the Seller/Taxpayer via a custom-prepared installment sales agreement, whereas the Charitable Remainder Trust often pays income (interest) only. The DST has the potential and likelihood to yield more bottom-line dollars to the property/capital asset Seller/Taxpayer than a Charitable Remainder Trust.
The DST has the ability to generate substantially more wealth over the long run than a direct and taxed sale. It may be superior to the Charitable Remainder Trust (CRT), installment sale or like-kind property exchange in many respects. Consult your tax advisor to ascertain the potential benefits of this option.
How Do I Determine My Payments From the Trust?
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 approval.
Meet Our Team
James J. Flick
Senior Attorney
James M. Flick
Attorney
See How Our Clients Have Benefited
You can rely on Lifeboat Trust Services to protect you and your beneficiaries and ensure your trust is administered as intended.
I have worked with Jim Flick for over 8 years, and there is nobody out there like him and his team. He has a background not only in estate planning and business law, but also has in-depth tax knowledge. His expertise has guided me into making some great decisions and employing strategies that have paid off in the long-term. He is always on top of the industry changes and keeping me ahead of the game.
