DST FREQUENTLY ASKED QUESTIONS

Have you heard of Delaware Statutory Trusts, but still have questions? We’re answering the top 6 DST questions we get asked on a regular basis. 

We are always glad to hear that you have questions!  Your natural curiosity allows us to provide you with an educational knowledge base for your decisions.  Let’s see if we can answer a few of the questions you may have here and then we invite you to reach out for a complimentary consultation with our firm.  Yes, we are financial professionals, but we are educators first and foremost.

Frequently asked questions that we have heard:

I hear the word “Accredited Investor” – please define.  To be an accredited investor, an individual must have had earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years and “reasonably expects the same for the current year,” according to the SEC. Or, the individual must have a net worth of more than $1 million, either alone or together with a spouse. With the passage of the Dodd-Frank Act, this now excludes a primary residence as being eligible as part of an investor’s net worth (investors who had existing accredited investments but who now fail the net-worth test without their residence being valued were grandfathered).

What is a Qualified Intermediary? A Qualified Intermediary is a "third party" who assists you in accomplishing the tax deferred exchange. The Qualified Intermediary is responsible for drafting of the 1031 like-kind exchange documents to properly structure the exchange.

Once I invest in a DST property, how long does one typically hold the DST? A length of 3-10 years is the typically amount of time that a DST will be held.

What type of replacement properties do 1031 DSTs have available? When it’s time to purchase your replacement property, 1031 DSTs have a variety of property types to select from. The DST replacement property is utilized by having national institutional sponsors who usually have available different types of properties-diversified by type, geography and investment grade value. These property types could be selected from retail, office, multifamily, medical office, industrial, self-storage and student housing.

What happens to the DST investment if I die? If the owner dies before the DTSs are sold, this asset is inherited by a person from the estate of the taxpayer who completed the original exchange. At the time of death, the replacement property will have a stepped-up cost basis equal to the property’s fair market value on the date of death. Whatever gain was deferred in the original Like-Kind Exchange transaction will be eliminated entirely following the inheritance. The initial tax deferral on the property now turns into a tax-free event. This clearly could be a vital estate planning tool to eliminate large tax liabilities on appreciated property.

When the DST property is sold, what happens?  Once a DST property sells, all DST investors will receive their pro-rata share of the sales proceeds consistent with their initial investment, including any potential appreciation. The options to the investor at this point are to either exchange into more DSTs, exchange into other investment property, pay taxes or a combination of these.

If you are a qualified investor, tired of the headaches of being the landlord, not interested in fixing one more toilet, then a DST may be a potential benefit to you.  Be sure to get educated on the details and risks that may be involved for your unique situation.

Schedule a BRIEF call with us today!