buy at optimal timing
1031 exchange vs
deferred Sales Trust
Benefits of a Deferred Sales Trust (DST)
and buying real estate through
the DST vs 1031 exchange
1) “Dave Ramsey” Get out Debt Plan: If you sell and move your equity into a Deferred Sales Trust you don’t have to replace the debt vs the 1031 exchange where you have to purchase a property of equal or greater value. Having no debt lowers your risk, especially in a highly appreciate market.
2) Buy at Optimal Timing. Freedom to Sell High and Buy Low: Buyback into and back out of real estate by partnering with your DST Trust. Direct the funds to a lender to loan the funds for a business purpose such as real estate loan, buy into a business or develop RE at your own timing (all capital gains tax deferred, without having to follow any timing guidelines.)
3) Net rental income: If you buy a property through the DST you don’t have to take the rental income right away. Instead, the income can be put back into the DST and invested in Stock, Bonds, Mutual Funds. This can lower your tax bracket potentially and you earn interest on the income you would have normally paid Uncle Sam.
4) Partnership Interest: When a partnership or other ownership group sells an appreciated asset, they do not need to remain together to achieve tax deferral, as is typically the case with a 1031 Exchange. Each individual owner can have their own Deferred Sales Trust:, the assets of which can be managed to each taxpayer’s own individual risk tolerance and preferences.
5) A 1031 Exchange alternative or rescue: Unlike a 1031 Exchange, the proceeds from the sale do not have to be invested in “like-kind” property in a very short timeframe to achieve tax deferral. Moreover, a DST can be used to rescue a 1031 Exchange that is in danger of failing. Once the funds are in the DST the funds can be directed to a new LLC which can own, develop and run a business all while remaining tax-deferred.
6) Liquidity and Diversification: Convert an illiquid asset, like a business or commercial real estate, into a diversified portfolio of liquid investments. This can help reduce risk and volatility by preventing overexposure to a single asset class.
7) Depreciation Schedule: resets when the property is purchased in partnership with a DST
8) Move Funds Out of Taxable Estate: At the close of escrow, move funds outside of taxable estate to avoid the 40% estate tax on amounts over $11M single or $22M married couple.
Lifetime Support & Audit defense included in every closed Deferred Sales Trust
Investments managed by Wealth Adviors with access to investment grade sercurities
24/7 access to view funds. Funds only move with Client’s signiture. DACA account protection. A broad variety of investments can be selected to secure the principal and the return specified in the note including Stocks, Bonds, Mutual Funds, ETFs, REITs, Managed Accounts, Annuities and Life Insurance, etc.
Buy Investment Real Estate by yourself or via syndications by partnering with your DST trust at any time all tax deferred.
Move equity outside taxable estate
Save 40% on any amount above $11M single or $22M married couple still inside taxable estate by using the Deferred Sales Trust to remove funds from taxable estate when escrow closes.
What are the fees?
CLOSING COSTS
Attorney one time 1.5% of trust up to $1,000,000 & 1.25% of trust above $1,000,000
- Tax and Legal Structure
- Includes Audit Defense for life of the trust
- Includes working with CPA to properly report your personal tax return
- This fee is tax-deductible
At Close of Trust and Annual Recurring
Capital Gains Tax Solutions: Trustee 50-85 basis points (1/2 of 1%) to .85%
- Tax Return $750-$1,000 range
- Out of network investments (such as real estate or funding a real estate development project or business) – (1.5% -150 basis points) for funds removed from the trust into an LLC, however, subtract the Financial Advisor Fees for amount directed.
- Optional 10 year Carve Out One Time Upside FEE: you may purchase outside of the trust a one-time optional option carve for 1.5% for funds directed to an LLC to invest into out of network investments (as many deals as you want for the duration). This is 10-year option to direct funds to an LLC which can buy and sell real estate in and out of the Trust all tax-deferred or .75% for 5-year term.
ANNUAL RECURRING FEE
Financial Advisor 50-130 basis points
- Depending on what Financial Advisor manages the funds, account size and where the funds are invested.
- + DACA Account Fee $1,500 (if DST account is less than $1M) every 18 months.
“I’ve personally found that after being involved in hundreds of real estate transactions, one of the biggest concerns that sellers face when they contemplate divesting of one of their Real Estate investments, is the significant capital gains exposure that might come as a result of the sale. In fact, I’ve seen firsthand many situations where owners of investment property feel somewhat trapped between a rock and a hard place and feel hostage to the outrageous capitals gains that they will pay in the event of a sale”
Kevin Bupp
Host of #4 CRE Podcast
“The 1031Exchange is the best-known way to defer capital gains on the sale of a property. But what if a few of the Limited Partners (LPs) in a syndication want to cash out—while the rest are looking for an option to defer? The DeferredSalesTrust, or DST, may just be the perfect solution!”
Michael Blank
Host of Top 20 CRE Podcast
Want to see a free DST illustration for business or property? Visit our link and enter in your details:
Frequently Asked Questions
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Featured Closed Deal
Leveraging The Deferred Sales Trust To Defer Capital Gains Tax and Retire from Apartment Management
Meet Peter
CLICK HERE TO MEET PETER: Learn how the deferred sales trust helped a long term Marin, CA Real Estate Broker and Multifamily Owner decide to not to 1031 and instead retire from the toilets, trash and liability. Brett dives in with Peter's experience in this short but insightful interview:
Please explain or expand upon your particular problem you were having before you discovered the Deferred Sales Trust?:
"I was selling an 18-unit apartment building that had a low basis since I had done a 1031 exchange from a well-depreciated property to buy it and would be looking at a 6-figure tax bill." -Peter
What did the frustration feel like as you tried to solve that problem?:
"I had been in touch with a number of brokers who were offering Delaware statutory trust and it was confusing to sort out who the best were to deal with."
What was different about the Deferred Sales Trust?:
"The fact that the money is out of the real estate market, though having it all in the financial markets is a concern, since the markets seems high and due for a correction."
Take us to the moment when you realized the Deferred Sales Trust was actually working to solve your problem.:
"Probably when you(Brett) sat down and walked me through it."
Tell us what life looks like now that your problem is solved or being solved.:
"It's a relief to be rid of the apartment building. It was a very lucrative investment, but it came with a lot of headaches that took up my time and energy."
Peter went on to discuss how the deferred sales trust was more attractive to the 1031 since he:
Did not want to start over with a new 1031 property. Wanted to retire from the toilets, trash, management and liability and trade them for time, travel, liquidity, diversification and retirement. He plans to keep the funds invested into a conservative portfolio of liquid investments and then have the funds shifted to CRE deals when the prices make sense.
"It's a relief to be rid of the apartment building. It was a very lucrative investment, but it came with a lot of headaches that took up my time and energy."
