Considerations for using a Delaware Statutory Trust in estate planning

A Delaware Statutory Trust (DST) is a legal entity that can be used for various purposes, including real estate investments and, in some cases, estate planning. When it comes to estate planning, DSTs are often employed in the context of 1031 exchanges, which allow individuals to defer capital gains taxes on the sale of certain types of property. Here are some considerations: 

Ownership Structure:

A DST allows individuals to pool their money to invest in real estate, typically income-producing properties. Investors purchase beneficial interests in the trust, and the trust holds title to the real estate.
Transfer of Interests: Individuals can transfer their beneficial interests in a DST as part of their estate planning strategy. This transfer can be accomplished through wills, trusts, or other estate planning instruments.

Tax Deferral:

DSTs are often used in 1031 exchanges to defer capital gains taxes on the sale of appreciated real estate. This can be advantageous for estate planning as it allows the individual to preserve wealth and pass it on to heirs without the immediate tax consequences of a sale. Upon sale of the DST, the heirs should benefit from a stepped up cost basis on the transaction.

Stable Income Stream:

DSTs typically generate income through the operation of the underlying real estate. This income can be distributed to beneficiaries, providing a stable income stream for heirs.

Tailored Solutions:

DSTs offer flexibility in structuring ownership and distribution arrangements. This flexibility allows for the customization of the trust to meet specific estate planning goals.

Legal and Tax Advice:

Given the complexities of estate planning and tax implications, it is crucial to seek advice from legal and tax professionals experienced in DSTs and estate planning to ensure compliance with relevant laws and regulations.

It’s important to note that while DSTs can be beneficial in certain situations, they may not be suitable for everyone. The use of DSTs in estate planning depends on individual circumstances, financial goals, and the types of assets involved. Before incorporating a Delaware Statutory Trust into your estate planning strategy, consult with legal and financial professionals to assess its suitability for your specific situation and to ensure compliance with applicable laws.