5 Potential Advantages of a Delaware Statutory Trust
Education is very imperative to us – we focus on making sure that our clients are fully vetting a financial opportunity from every angle. It’s important to us that our clients feel comfortable and confident with not only DSTs, but our process, due diligence, and the partners/sponsors that we work with. We are dedicated to helping you navigate this opportunity with ease and knowledge.
Last week we discussed The Do’s and Don’ts of DSTs . Now let’s look at some of the potential advantages of a Delaware Statutory Trust.:
1. Passive Management – you can eliminate the day-to-day headaches of property management. Are you tired of the hassles of real estate ownership and management? A DST property will allow you to step out of the active role and into a passive ownership role. This means more time with your family, more time for golf, or community services.
2. Tax Deferral - No one wants to end up with the huge tax bill that includes federal capital gains tax, state capital tax gains, depreciation recapture tax, etc. upon the sale of investment property. Finding the right property to exchange into can be a headache itself. The DST solution allows an investor to be a passive owner on a tax-deferred basis. It allows for a step-up in basis upon the passing of the owner. Step-up in basis refers to the IRS elimination of Capital Gains, Depreciation Recapture, and Net Investment Income Tax upon the death of the owner. In community property states, a surviving spouse receives a full step-up in basis to the properties’ fair market value.
3. Time Solver – Many times when an investor looks to sell investment property, they are faced with the time clock – the 45-day identification period. This can cause anxiety and stress. Using a DST property to close can give the investor relief from the time crunch as they are able to close quickly and complete the exchanges due to the turn-key nature of a DST exchange.
4. Cash Flow Increase – Several factors such as low number of renters, under-market rent costs or properties sitting vacant can cause a lower cash low status then expected with investors. Using the DST property exchange, the investor may see a cash flow increase due to the passive ownership model based on tax-deferred basis.
5. Diversified Portfolio – DST investments can be combined to create a diversified portfolioof passive property for an investor.
There are many things to consider when you are looking at a DST exchange. We strongly encourage our investment clients who are property owners to have a strategic plan in place before an exchange begins. It’s very important that the investor understand not only the benefits, but the risks involved so they can make an informed decision that is best for their unique situation.
Before you step in the direction of using a Delaware Statutory Trust, click below to schedule your no-obligation meeting or call our office at (704) 450-8352. You can also contact us by email at Douglas@PlanWithAWS.com.
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