Delaware Statutory Trust (DST)
A comprehensive guide to using DSTs as a popular solution for investors completing a 1031 exchange.
What is a DST?
A Delaware Statutory Trust (DST) is a legal entity constructed as a trust, which allows multiple investors to pool their funds to own fractional interests in a professionally managed portfolio of one or more properties. For tax purposes, the IRS recognizes DSTs as qualifying replacement property for 1031 exchanges, making them a powerful tool for deferring capital gains taxes.
Key Benefits for 1031 Exchangers
Passive Ownership
Eliminates the day-to-day hassles of property management, as a professional sponsor handles all operational responsibilities.
Access to Larger Properties
Allows investors to own a share of institutional-grade real estate that would typically be out of reach for an individual investor.
Diversification
Investors can diversify their 1031 exchange proceeds across multiple properties, asset classes, and geographic locations.
Simplified Identification
DSTs can help investors meet the strict 45-day identification and 180-day closing deadlines of a 1031 exchange.
Risks and Considerations
DST investments are illiquid, meaning they cannot be easily sold. They are suitable only for accredited investors. As with any real estate, they are subject to market fluctuations and risks. Investors do not have operational control over the properties.