Tax Deferral and Savings with a Deferred Sales Trust™

Deferred Sales Trusts

Keza Realty and Amber Martin are experts in the art of helping people secure long-term, transformational wealth that spans generations of family members. Amber has found that one of the most effective means of increasing the net worth of multiple generations is through the establishment of a Deferred Sales Trust™.

A Deferred Sales Trust™ (DST) offers an alternative to a 1031 Exchange, for those who are interested in selling a business, highly appreciated stock, or a real estate investment property.  Creating a DST is a viable strategy for individuals with high tax liability to reduce their capital gains tax exposure.

Basically, a DST occurs when the owner of a security such as a stock, investment property or business establishes a trust, and then sells the security to the trust.  The next step is when the trust, now the owner of the security, sells the security to a buyer.  The previous owner of the security is paid by the trust through the creation of an installment sales contract.

The payments to the previous owner of the security can be funneled directly into a new trust, deferred until a later date, or set up to flow to future generations of family members.  The capital gains taxes that are paid to the IRS do not become due until the recipient of the installment payments actually starts to benefit from the funds.  This is advantageous to selling a security the traditional way and paying a large capital gains tax, because the money that is saved through the creation of the trust can be used to fund other investments.

Some of the chief advantages to creating a Deferred Sales Trust™ are:

  • Tax Deferral – Allows for the deferral of taxes until payments begin.
  • Tax Benefits to Heirs – Creates a freeze on the estate for tax purposes.
  • Helps to Maintain Wealth – Keeps the money where it belongs, in the family.
  • Facilitates Increased Liquidity – Transforms illiquid assets into monthly payments.
  • Income Stream – Produces an income stream for retirement or other purposes.
  • Avoids Probate Court – Through adequate planning of the estate, probate is avoided.

Of course, individuals should always conduct their own research or consult with their tax advisor prior to making a decision.  If you have a highly appreciated asset that you are considering selling, let’s talk! As a DST Consultant, Amber can help you navigate the process and get the due diligence started. Give her a call today at 949.244.0647