An Introductory Guide To Delaware Statutory Trusts

Investing is the best way to expand your financial resources and gain true wealth. Many people believe that investing in real estate is a safe bet, but owning real property can come with some limitations. The capital gains that you enjoy when an investment property appreciates can be reinvested. Putting these gains into additional real estate purchases can help you avoid paying a capital gains tax but can leave you with more properties to manage.

A Delaware Statutory Trust (DST) can be beneficial in helping you grow your real estate wealth without taking on additional responsibilities.

Eliminate Oversight

A DST is essentially a portfolio made up of high-quality commercial properties. When you choose to invest the profits from the sale of your private investment property in a DST, you own a fractional interest in each property listed in the DST. This approach to real estate investment allows you to enjoy the financial gains associated with owning real estate, while passing the oversight and other managerial responsibilities on to the trustee.

Defer Taxes

Whenever you sell a property and make a profit, the government wants you to pay taxes on that profit. One of the greatest benefits a DST can offer is the ability to defer any capital gains taxes you might have paid on your real estate profits.

The IRS considers DST investments as "like kind" with real property. This means that investing your profits into a DST is viewed the same as investing those gains into a new private property. Capital gains taxes can be significant, so avoiding these taxes can help you retain more of your real estate profits over time.

1031 Exchanges

DSTs are valuable tools for investors hoping to use 1031 exchanges to reduce their tax burdens. Proceeds from a property's sale must be invested in like kind property in order to qualify for a 1031 exchange.

A DST gives each investor the opportunity to be a beneficial owner in the properties listed within the DST portfolio. While you won't hold legal title to the properties, you will be able to enjoy your share of the income, appreciation, and tax benefits associated with those properties. The status of beneficial owner meets the government's 1031 exchange guidelines, making a DST eligible for inclusion in this kind of investment transaction.

Once you understand how DSTs work, you will see why they are becoming more popular among real estate investors today. Look around for DST 1031 services in your area.