Roundtable Focus Group | Visits the Deferred Sales Trust Strategy


Today we held a meeting in Walnut Creek, CA. to introduce a strategy known as the “Deferred Sales Trust” to a group of elite Executive Level Brokers and Realtors.  The program was sponsored by QFN out of Sacramento, CA.  The CEO / PRESIDENT Daniel Ahmad was the presenter of this optional strategy for Sellers, that can also be used all across the Country. 

We had 13 Top Producing REALTORS / BROKERS from both Contra Costa and Solano Counties in attendance.  There were several reasons we wanted to introduce this strategy, and have a group of trusted and reputable Real Estates Professionals as a focus group:

1. To provide the ability to help sellers with this new “Deferred” tax strategy
2. To open new opportunities and doors which will increase listings and referral business
3. To help agents get educated on the DST in the event a seller may have been introduced to it by their CPA or Financial Planner, or heard about it from a family member or neighbor (no surprises)

The group met for about one hour today, and the presentation was very informative.  There were many questions and open discussions regarding ALL the possibilities, both negative and positive.  What were the differences of the DST as compared to a TIC or a 1031 Exchange.  These Talking Points will provide you with a brief summary of the key ideas and facts about what a Deferred Sales Trust is, how it works, and what the benefits are to the seller. This perfectly legal way to defer capital gains tax and reduce your sellers tax burden may be better than anything you have previously heard about. 

 

                THE DEFERRED SALES TRUST STRATEGY

   

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Summary:
A Deferred Sales Trust is a special type of sale authorized by the IRS that lets the property seller pay the capital gains over time, rather than immediately at the time of sale as in a typical transaction.  Rather than losing a significant sum to taxes at the time of sale, you have the opportunity to pay your capital gains taxes over many years.

Benefits:
Avoid paying current capital gains and depreciation recapture, create lifetime income, protect assets from creditors and lawsuits, and the assets pass to your beneficiaries, estate and gift tax free. There is no maximum to the size of value of the transaction. The DSTTMcan be used with any kind of entity, i.e., LLC, S or C election corporations as well as individuals who own real estate , rental properties, vacation homes, commercial properties, hotels, land, industrial complexes, retail developments, and raw land, to name a few.

Why Choose a DST:
1)
You may want to sell but don’t want to pay the taxes.  2) You may want steady income and asset protection.  3) You may want to avoid estate taxes.  4) You may want to sell because your investment property appreciation is worth more than what the rental income is paying (i.e. asset in a trust would provide higher income).  5) You may feel that managing real estate is no longer attractive.  6) You may want to sell but can’t find a quality 1031 to exchange into.

Legality:
Approved by the IRS, The DSTTM is a legal method, combining several sections in the tax code, which allow the seller of the property to defer capital gain taxes due at the time of sale over a period of time, even beyond your lifetime. Deferring taxes, legally, is not new – commonly used tax deferral examples are 1031 exchanges and installment sales. Various types of trusts are used by millions of Americans to protect and transfer assets to their heirs outside of probate and to minimize and even avoid selling their assets to pay estate taxes. 

Control of Money:
You choose your trustee(s) and decide how the money is to be invested.  Beneficiaries don’t control or have access to your money.

Features of a DST:
A “DST”, facilitated by you and the QFN team of experts, offers sellers the opportunity to:

•Avoid unlimited amount of current taxation on the sale.
•Eliminate the requirement to immediately reinvest in real estate or another business
•Receive steady and reliable income not dependent on tenants or business operations.
•Maximize net after tax and after expense income from their assets.
•Terminate all active management responsibilities of owning real estate or a business.
•Increase the basis on all new properties and businesses, avoiding “Low Basis Carryover”.
•Pass on any amount of assets to their beneficiaries, free of estate taxes.
•Receive income on a tax-advantaged basis, always lower than ordinary income rates.
•Defer the income from the assets until the income is actually needed.
•Diversify assets out of real estate and businesses to minimize financial risk.
•Access their funds for emergencies and opportunities.
•Protect assets against creditors and lawsuit judgments.
•Buy smaller properties, other businesses, and even foreign properties and businesses, while avoiding all current taxation.   

When To Use: 
This tax strategy can only be used if a sale has not closed escrow.  You must transfer the property to the trust BEFORE the close of escrow.

Paying the Taxes:
From your annuity payments, a portion is tax free, another portion is taxed as ordinary income, and a final portion is taxed as capital gains.

The Next Step:
If you’re in escrow now, or seriously considering selling, QFN will provide a free Illustration Request.  This no obligation report will show the results of your transaction using a Deferred Sales Trust.

Compliance:
Not all tax and financial strategies are suitable for all investors.  You should always consult with your tax and financial advisor’s before making a decision.

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If your sellers ask you about a DST at your listing presentation, you might find the information in this post to be somewhat valuable.  If your sellers tell you they don’t want to sell because of the equity they have in their property, and the possible tax consequences, you might want to mention the DST.  This is not an endorsement or sales post, it is merely an educational tax strategy that I wanted to share with you.  If you have the power to help your sellers in ways no other agent can, then you bring “additional value” to those who need your services and expect you to have this type of knowledge.  I hope you can benefit from this information as much as many of your sellers and investors can!

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