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Three Estate Planning Benefits of the DST You Need to Know About

Many of our clients who have used the Delaware Statutory Trust (DST) for their 1031 exchange transactions certainly recognize the tax-deferral benefits this structure affords them. But many of these investors may not be aware that the DST also provides several important estate planning benefits recognized by a growing number of estate planning professionals. Here is an overview of the three key benefits:

Can Help Avoid Conflicts Among Heirs

One of the more common challenges families encounter upon the settlement of an estate is the different opinions on how real estate investment property should be handled. Some siblings may want to keep the investment property for income purposes, while others would prefer to sell and use the proceeds for other purposes. Because DSTs are structured so that investors each own a fractional interest, that interest can be split among heirs, enabling them to do with their shares as they please.

Potential to Eliminate Capital Gains Tax

DSTs are obviously popular among real estate investors for the ability to defer capital gains tax. There is an added benefit, however, from an estate planning standpoint. Upon the death of the DST owner, heirs inherit the investment at current market value on a stepped-up basis, potentially eliminating any capital gains tax obligations. A stepped-up in basis is defined as: “the readjustment of the value of an appreciated asset for tax purposes upon inheritance, determined to be the higher market value of the asset at the time of inheritance.” - (https://www.investopedia.com/terms/s/stepupinbasis.asp )

Ability to Avoid Headaches of Property Management

DST properties are structured with in-place professional management. The advantage for heirs, obviously, is that they need not contend with all the work and anxieties that go along with managing investment property. This can be particularly important when estates are being settled since heirs need time to grieve and would much prefer to do so without having to deal with all the hassles of property management.

While a DST is not appropriate for every investor, it continues to be a popular structure for 1031 Exchange investors seeking to enjoy the potential benefits of tax-deferral in professionally managed institutional quality properties. And as this post highlights, the DST can also provide other advantages that help investors in several important aspects of the estate planning process.

If you are considering a DST investment and would like to learn more about how it can be used as an estate planning tool, we encourage you to discuss this in greater detail with your attorney and CPA. You can also reach us directly at  at info@firstguardiangroup.com. 

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Paul Getty

Paul Getty is a licensed real estate broker in the state of California and Texas and has been directly involved in commercial transactions totaling over $2 billion on assets throughout the United States. His experience spans all major asset classes including retail, office, multifamily, and student and senior housing. Paul Getty’s transaction experience includes buy and sell side representation, sourcing, and structuring of debt and equity, work-outs, and asset and property management. He has worked closely with nationally prominent real estate brokerage and investment organizations including Marcus Millichap, CB Richard Ellis, JP Morgan, and Morgan Stanley among others on the firm’s numerous transactions. Paul Getty also maintains a broad network of active buyers and sellers of commercial real estate including lenders, institutions, family office managers, and high net worth individuals.

Prior to founding First Guardian Group/FGG1031, Paul Getty was a founder and CEO of Venture Navigation, a boutique investment banking firm specializing in structuring equity investments made by institutions and high net worth individuals. He possesses over 25 years of comprehensive worldwide business management experience in environments ranging from early phase start-ups to multi-billion-dollar corporations. His track record includes participation in IPOs and successful M&A activity that has resulted in investor returns of over $700M.

Paul Getty holds an MBA in Finance from the University of Michigan, graduating with honors, and a Bachelor’s Degree in Chemistry from Wayne State University. He is a member of the Institute of Real Estate Management (IREM), a Certified Property Manager Candidate (CPM), and a member of the US Green Building Council. Paul Getty holds Series 22, 62, and 63 securities licenses and is a registered representative with LightPath Capital Inc, member FINRA /SIPC.

Paul Getty is a noted speaker, author, and actively lectures on investments and sales and management related topics. He is the author of The 12 Magic Slides, Regulation A+: How the JOBS Act Creates Opportunities for Entrepreneurs and Investors, and Tax Deferral Strategies Utilizing the Delaware Statutory Trust (DST), available on Amazon and other retail outlets.

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