The DST has been vetted and lauded by various law firms, accounting firms and financial professionals throughout the United States. These include an array of major national firms with prominent state and federal tax practices. Estate Planning Team has been doing the Deferred Sales Trust for 22 years with zero cases rescinded by the IRS. The foundation of the structure is IRC 453 in the tax code which has been in place for over 80 years.
Reviewed by IRS:13 of the DST clients have had random audits not triggered by the DST and they were reviewed by the IRS and closed out as no change audits.
Reviewed by FINRA
Reviewed by National Tax Law Firms
Audit Defense – included in each DST and tax attorneys indemnify each client.
Over 2,000 deferred sales trust deals closed valued at over $1B by the Estate Planning Team.
3 Sets of Fees
1) Tax Attorney – One-time fee
-1.5% up to $1 Million
-1.25% on anything over $1 Million
-Includes Legal and tax structure and Audit defense
2) Trustee Management – Annual Recurring Fee
-50 bps(1/2 of 1%)
-Annual tax return in $750 range
-Out of network investments (such as real estate or funding a real estate development project or business) – 50 basis points annually for a total of (100 basis points) for funds removed from the trust into an LLC + one time 1.5% fee for funds removed, however, subtract the Financial Advisor Fees below.
3) Financial Advisor Annual Recurring Investment Fees
-Ranges from .50bps – 100bps depending on account size + DACA Account Fee of $1500 every 18 months
Over 2,000 Deferred Sales Trust have been closed collectivley by The Estate Planning Team and Campbell Law. Total value of these trust are over $1,000,000,000. 13 clients who have a deffered sales trust were audited unrealted to their deffered sales trust, however, each of these 13 DST cases was closed out with no change audits.
Just about any asset that is subject to capital gains taxation can be deferred with the DST. These assets include rental properties, primary homes, commercial properties, private stocks and bonds, family businesses and your insurance policies that need to be sold for cash. Most common types of asset sales using the DST are the sale of real estate and the sale of a business. The DST can be sometimes be used for other types of asset sales and transactions such as:
a 1031 Exchange that would otherwise fail to be properly completed can be “rescued” using the DST;
the refinancing of a note receivable from a third party;
sales of marketable securities where there are restrictions on the stock or limited trading volume of such stock;
The Seller sets up the timeline of when the payments will be made (interest and principal) and the amount of each payment. The payments can be structured in any timeline and amount that the Seller wishes. They can be interest only with the principal amount paid in one balloon payment at the end, or where there are even payments paid over the term of the structure. Regardless, the taxes on the gain are triggered when the principal payments are received. Capital gains rates in the year the payment is received is the rate applied to the principal payments as received. The interest earned on the principal is taxed at ordinary tax rates in the year received. Most of our clients structure the note as a 10-year term and have the option to renew for another 10 years at 9 years and 6 months. This can occur as many times as the note holder would like it to. The noteholders heirs can inherit the position and do the same.
Yes, for investment real estate. Please contact Capital Gains Tax Solutions, the Estate Planning Team or a duly qualified DST tax professional to discuss this option. We recommend that you work with Estate Planning Team’s Professional Advisors who are experienced in trust law, trust asset management and tax law.
We understand you may have reservations. We want to educate you and your trusted advisors before moving forward. Please note:
– 2000+ cases closed in 22 years
– Please feel free to talk to our clients
– Also, our tax attorney indemnify each client case
– Please have your legal counsel and CPA sign the NDA, review the DST structure and give their blessing before moving forward.
To note: all of the above is no cost, no obligation. Fees are only charged if you decide to close the Deferred Sales Trust.
For detailed technical information, please have your CPA contact the Estate Planning Team for a fully 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.
No, however, the DST interest earned on the note is considered income and help you qualify for a home loan. Also, you may cash out the amount you need for a down payment at any time from the DST, however, you would pay capital gains on the amount cashed out of the DST. Also, installment note is considered a steady stream of income and does not need to be seasoned for 2 years as some sources of income need to( as long as the note has at least 2 years of income set to pay to you).
Yes. Even after the $250,000 or $500,000 exclusion, the DST can defer the capital gains tax. As a recent example, a couple who sold their primary residence for $26M in Southern CA deferred $6M in capital gains tax. After their $500K exemption and since primary residences are not eligible for a 1031 exchange, they still owed $6M in capital gains tax. Instead of paying this $6M to the IRS, they now are earning interest on this extra $6M and living off of the interest for as long as they want to while the funds are invested in stock, bonds, multiple funds or back into real estate at their own timing (all capital gains tax deferred). This also works for stocks, seller carry back notes, syndication deals, carried interest and just about anything else which has capital gains tax.
Yes, please contact Capital Gains Tax Solutions, the Estate Planning Team or a duly qualified DST tax professional to discuss this option. We recommend that you work with Estate Planning Team’s Professional Advisors who are experienced in trust law, trust asset management and tax law. *Some 1031 intermediary companies are experienced with this and will allow the Deferred Sales Trust language into your 1031 exchange agreement and some will not. We recommend you choose a 1031 intermediary who will allow the language to ensure the DST can save a failed 1031 exchange.
1) The Deferred Sales Trust (DST) gives you the ability to sell high and buy low and relive the 1031 pressure of 45 day and 180-day deadlines. The DST can reinvest into Real Estate (all capital gains tax deferred) and back out of real estate at any time while the 1031 cannot. If it were 2007 all over again and you knew you could sell at a record high, and invest your capital into conservative bonds and wait until the market corrected, would you? The DST gives you this option, while 1031 does not.
2) Direct up to 80% of the funds to an LLC and partner with the trust for a business purpose such as purchasing investment real estate, loan business, buy into a business or develop investment RE at your own timing (all capital gains tax deferred, without having to follow any timing guidelines.)
3) The DST can save a failed 1031 exchange. In other words, at day 46 or day 181 the funds from the intermediary can be sent to DST and therefore the capital gains tax is tax-deferred. This provides extra peace of mind in case your upleg does not work out or the seller or lender will not deal.
4) Truly retire for real estate ownership. Be rid of the toilets, trash, liability and management headaches.
5) Liquidity and Diversification: Diversify your capital into multiple real estate markets, REITS, stocks, bonds, multiple funds. The 1031 is only into like-kind investment real estate and typically is only 1-3 properties and therefore only 1- 3 markets. Unless an investor uses a non-recourse loan the liability remains with the owner personally vs in the DST and invested into other large stock exchange companies which have the liability.
6) Convert an illiquid asset, like a business, primary home, art, collectibles 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. 1031 is only for investment property.
7) Deprecation Schedule resets when the property is purchased in partnership with a DST. A 1031 exchange the depreciation schedule travels,.
8) 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.
9) Net rental income. If you buy a property through the DST you don’t have to take the rental income. 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.
10) 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.
1) Retain the stepped-up basis. The 1031 exchange maintains the stepped up basis while the Deferred Sales Trust (DST) does not, however, your heirs can step into your shoes and maintain the DST trust which would maintain the capital gains tax deferral.
2) Lower one time fees with 1031 exchange vs ongoing annual fees with DST.
The funds are held in some of the largest banks in the world such as Bank of Newyork Melon, Sunwest Bank and TD Ameritrade. The note is secured against the assets the funds are invested in. Funds are held in a DACA account. Escrow has all the funds, all the time. 24/7 Access to view funds and funds only move with your signature. DACAs are tri-party agreements between a lender (also often referred to as the secured party), a borrower and a depository institution. The purpose of a DACA is for a lender to gain control over its borrower’s deposit accounts that are held at a depository institution other than the lender, so that the lender can perfect its security interest in the deposit accounts. Some DACAs are structured so that the lender has exclusive control of the deposit accounts immediately upon execution of the DACA. Other DACAs allow the borrower to access, withdraw and transfer funds in the deposit accounts until such time that the lender provides a notice to the depository institution that the lender is taking exclusive control and that borrower is no longer permitted to access, withdraw or transfer funds from the deposit accounts.