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Deferred Sales Trust
  • Gain More Flexible Access to Capital
  • Spread Out Tax Capability
  • Diversify Investments

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Deferred Sales Trust

A Deferred Sales Trust (DST) is a tax strategy that lets property or business owners sell their assets while deferring capital gains tax over a structured period. This legal and flexible strategy is often used by people who want to sell highly appreciated assets but want to avoid the significant capital gains taxes from a direct sale.

Here is a simplified sequence of how a Deferred Sales Trust works:
  • Creation of Trust: A trust is set up by the seller with the help of a tax attorney or financial professional. A third-party trustee manages the trust.
  • Sale to Trust: The owner sells the appreciated asset to the trust. The trust pays for the asset with an installment sales contract.
  • Trust Sells the Asset: The trust then sells the asset to the final buyer. The proceeds of this sale remain in the trust.
  • Installment Payments: The trust makes installments to the original seller over a contractually agreed period. These payments can be tailored to the seller's financial needs and include principal and interest.
  • Capital Gains Tax: Capital gains tax is deferred and is only payable as the original seller receives the installment payments from the trust.
This structure is particularly beneficial in cases where sellers are looking to retire or transition into a different investment or business. It allows them to potentially gain more flexible access to their capital, spread out their tax liability, and possibly even diversify their investments. However, working with a qualified professional is essential because setting up a Deferred Sales Trust can be complex, and mistakes could have significant tax consequences. It's also important to note that tax laws can change, so it's crucial to get up-to-date advice.
We are developing a complete guide to a Deferred Sales Trust plan.  Get notified when it's ready by giving us your information.  You will be one of the first to know. 
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* All strategies on this site are intended for informational purposes. It is highly recommended that all combinations of this strategy are implemented by a licensed and experienced professional.