A Delaware Statutory Trust (DST) is a legal entity created under the laws of the state of Delaware, USA. It is a type of trust that allows investors to hold an ownership interest in income-producing real estate assets, such as commercial properties, multifamily apartment buildings, and industrial facilities. DSTs are commonly used in real estate investment, especially in 1031 exchanges, which allow property owners to defer capital gains taxes by reinvesting the proceeds from the sale of one property into another.
DSTs are similar to traditional trusts in that they have a trustee who manages the trust and its assets on behalf of the beneficiaries, who are the investors. However, the key difference between a DST and a traditional trust is that a DST is a separate legal entity, which means that it can own and operate property in its own name. This provides the investors with limited liability protection, as they are not personally liable for any debts or obligations of the trust.
One of the advantages of investing in a DST is that it allows investors to own a fractional interest in a large, professionally managed property, without the hassles and responsibilities of direct ownership. Investors receive regular income distributions from the rental income generated by the property, and the trust can also sell the property and distribute the proceeds to the investors upon the termination of the trust.
DSTs have specific requirements to meet the legal definition, including having a trustee, a beneficial interest, and being managed by a business trust entity. They are regulated by the Delaware Statutory Trust Act, and investors should consult with an experienced attorney or financial advisor before investing in a DST to ensure that they understand the risks and benefits of such an investment.
What is the Difference Between a Deleware Statutory Trust vs a Deferred Sales Trust?
A Delaware Statutory Trust (DST) and a Deferred Sales Trust (DST) are both types of legal structures used in real estate investing, but they are distinct from each other in several ways.
A Deferred Sales Trust (DST) is a strategy used to defer taxes on the sale of a business or investment property. It involves setting up a trust and transferring the property to the trust in exchange for a promissory note. The note is then sold to a third-party buyer, and the proceeds are held in the trust. The property owner can receive payments from the trust over a period of time, and the taxes on the sale of the property are deferred until the payments are received.
While both DSTs and Deferred Sales Trusts use the structure of a trust, the main difference between them is the purpose for which they are used. DSTs are typically used for real estate investing and can provide investors with regular income and potential appreciation, while Deferred Sales Trusts are used to defer taxes on the sale of a business or investment property.
