Introduction to Delaware Statutory Trusts (DSTs)

As you probably know, Delaware Statutory Trusts (DSTs) are legal entities that allow multiple investors to hold fractional ownership in commercial real estate assets. These trusts are especially popular for their role in 1031 exchanges, where they enable investors to defer capital gains taxes by reinvesting proceeds from the sale of a property into a "like-kind" asset. DSTs offer a unique blend of tax advantages, passive income potential, and access to institutional-grade properties, making them an integral part of modern investment strategies.​ 

Educating Yourself on DSTs

For qualified intermediaries, gaining a comprehensive understanding of DSTs is essential. This knowledge enhances your service and positions you as a more valuable advisor to your clients. Numerous resources are available to help you learn about DSTs, including seminars, online courses, and materials provided by DST sponsors. These resources cover everything from the basic structure and benefits of DSTs to detailed strategies for incorporating them into investment portfolios​​.

The Benefits of DSTs for Investors

DSTs offer several advantages to investors:

• Diversification: DSTs enable investors to diversify their real estate holdings across different property types and geographic locations without managing the properties themselves.
• Passive Income: Investors can receive regular income distributions from the trust's rental income, providing a steady cash flow without the hassles of property management.
• Tax Deferral: Through 1031 exchanges, investors can defer capital gains taxes, thereby preserving more capital for reinvestment and potentially eliminating capital gains upon death when transferring assets to heirs.
• Professional Management: DSTs are managed by professional sponsors who handle all aspects of property acquisition, management, and disposition, reducing the burden on individual investors​​.

These benefits align with investment property owners’ common needs and concerns, such as minimizing management responsibilities, securing stable income, and achieving tax efficiency.

Leveraging DST Knowledge to Enhance Client Relationships

Being well-versed in DSTs lets you have more in-depth and insightful discussions with clients and replacement property options for their 1031 exchanges. DSTs are commonly used as backup property selections if the investor cannot identify a suitable replacement property within their 45-day window or close on the property within the allotted 180 days. Educating clients on the DST option can be powerful in reinforcing the value you bring to clients.

Growing Your Business Through DST Introductions

Introducing DSTs to clients can significantly boost client referrals. When clients see the tangible benefits of DST investments—such as tax savings, passive income, and portfolio diversification—they are more likely to discuss these advantages with friends in a similar situation of selling investment property. This can elevate your opportunities for referrals.

Conclusion

In conclusion, understanding the role of DSTs in 1031 exchanges can provide strategic value to your practice. By educating yourself on the intricacies of DSTs and effectively communicating their benefits to your clients, you can enhance client relationships, increase retention, and grow your business. 

For more information and resources on DSTs, contact our team at Bangerter Financial. We look forward to working with you.