For many business owners, real estate has been a cornerstone of building wealth. Over the years, you may have accumulated commercial property tied to your business or investment properties on the side. But when it comes time to retire or transition your business, those same properties can present challenges. Managing tenants, keeping up with maintenance, and navigating the tax consequences of selling can quickly become overwhelming.
Fortunately, there are strategies that can help simplify these decisions and secure what you have built. Delaware Statutory Trusts (DSTs), when paired with 1031 exchanges, can provide powerful solutions.
Simplifying Real Estate Decisions with DSTs
A DST allows investors to exchange a single property for fractional ownership in a diversified, professionally managed portfolio of real estate. When combined with a 1031 exchange, this approach can help defer capital gains taxes while easing the burden of direct property management. For business owners evaluating an exit strategy or planning the next chapter, DSTs can be an important tool to reduce complexity and support long-term financial goals.
DST Use Cases
- Landlords Transitioning to Retirement – Owning property requires time and energy, two resources many retirees would rather direct elsewhere. With a 1031 exchange into DSTs, landlords can step away from the responsibilities of property management, defer taxes, and potentially generate passive income.
- Business Owners Exiting a Company – Selling a business that includes real estate often comes with significant tax implications. A DST investment through a 1031 exchange may help reduce the capital gains impact on the real estate portion of the transaction. Paired with other planning strategies, such as Qualified Opportunity Zone (QOZ) investments, DSTs can support a smoother financial transition.
How DSTs Add Value
- Deferring Capital Gains – Through a 1031 exchange, investors may defer capital gains taxes on appreciated real estate, helping preserve more of their wealth for future goals
- Diversification Beyond a Single Property – Owning one building or parcel of land creates concentration risk. Through a DST, business owners can diversify across multiple property types, markets, and Sponsors, helping to create a more balanced and resilient portfolio.
- Estate and Legacy Planning – DSTs can also play a role in estate planning. Fractional ownership interests may be distributed equally among heirs, helping to avoid disputes. Heirs may also receive a step-up in cost basis, minimizing taxes if they choose to sell.
A Fiduciary Approach to Your Future
At Trust Point, we understand that real estate decisions are closely tied to both your business and personal financial goals. They affect your retirement, your business transition, and the legacy you leave behind. Our fiduciary team works alongside you to simplify the complexities of 1031 exchanges and DSTs, ensuring each decision aligns with your broader financial plan. With thoughtful guidance and a clear strategy, we are here to help you simplify and secure your wealth, so you can move forward with confidence.
Interested in learning more about how DSTs could fit into your strategy? Click here to learn more.
