Delaware Statutory Trust

A Delaware Statutory Trust (DST) is a legal entity that holds and manages property investments. This type of trust is often used in real estate investment opportunities, where, with the coordination of a Sponsor, investors pool their resources to purchase and manage a property. The DST is a popular choice for investors who want to take advantage of the tax benefits of a trust structure while still maintaining control of their investments.

One of the main benefits of a DST is that it allows investors to defer capital gains taxes as they buy into and later receive the proceeds on the sale of their interest in the trust. This means that the investor, upon the property’s sale, can reinvest the proceeds without having to pay taxes on the gains until a later date. This can be a significant advantage for investors looking to reinvest their money without incurring a large tax bill.

Another advantage of a DST is that it can provide limited liability protection for investors. Because the trust is a separate legal entity, investors are not personally liable for any debts or liabilities incurred by the trust. This can help protect investors from potential lawsuits or other legal issues that could arise from property management. The funding of the purchase is entirely non-recourse against the individual investors.

A trustee must be appointed to manage the trust and its assets to form a DST. The trustee is responsible for making investment decisions and managing the property on behalf of the investors. Usually, the trustee is a professional organization, the Sponsor, specializing in managing real estate investments.

Investors interested in participating in a DST must purchase interests in the trust, similar to shares of stock in a corporation. While there may be exceptions, purchasing a DST should be considered a long-term investment.  The Sponsor has the sole responsibility to manage the property and time its exit the property (referred to as going full cycle).