What are the Long-Term Financial Benefits of Using a Deferred Sales Trust?
Making a million-dollar sale is a huge accomplishment. Unfortunately, capital gains taxes can be astronomical. Luckily, there are options to help you get the most out of your money. Moving your assets to a deferred sales trust is a great option. Keep reading to find out some of the long-term financial benefits you can expect from using a DST.
Less Financial Pressure And A Future Cash Flow
The best part was that I didn’t have to pay all those capital gains taxes at once. It was more like paying them off gradually, which really eased my financial pressure. Plus, I got to invest that money right within the trust, aiming for it to grow over time. I was setting up a future cash stream, making that initial sale even more rewarding down the line.
Income Flexibility and Tax Benefits
Deferred sales trusts offer flexible investment options. The money from the sale is invested within the trust, similar to any investment portfolio. This offers flexibility in managing your income and can help make your taxes more efficient. A DST allows for greater diversification of your assets rather than having all your money tied up in one business or property.
For someone selling a business, a DST can create an income stream similar to what they draw from the business while allowing the rest of the principal to grow tax-deferred within the trust. It is useful in planning retirement income.
The trust can be coordinated with other income sources, ensuring the payments are low enough to provide an income stream. This, combined with Social Security, pension benefits, or other incomes, won’t lead to extra taxes or the Medicare Part B surcharge. DSTs can help reduce [income] tax liability.
The Ability to Diversify Investments and Defer Taxes
One great reason to consider using a Deferred Sales Trust (DST) is that it lets you diversify your investments beyond just property. With a 1031 Exchange in real estate, you have to buy more real estate to complete the exchange. But with a DST, once the trust receives the money before taxes, you’re not just stuck with property. You can put that money into different investments, like bonds, stocks, REITs, managed accounts, annuities, etc. This gives you a more varied portfolio and [makes it] easier to liquidate, which might include real estate or not.
Also, using a DST means the money from the original sale stays tax-deferred in the trust until you find the right real estate deal, even if that takes years. This is more flexible than what you get with a 1031 Exchange.
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