The Deferred Sales Trust Strategy

Why is this man so Angry even after he sold his property?

Because No One Told Him He Could Have…

Avoided paying current capital gains
Eliminated current depreciation recapture
Invested more sale money by eliminating current taxes
Enjoyed lifetime income from the sale
Passed the assets to heirs, estate and gift tax free

All By Using A Deferred Sales Trust!

You’ve all heard of TIC (tenants in common), and the 1031 Exchange, but I bet you have not heard of the DST. What is it? Why do you need to know about it? To help those sellers who don’t want to sell because of the possible tax ramifications that could come from the sale of their home. This is a great way to help your sellers with capitol gains tax and other financial issues when it comes to deciding if they want to sell or not.

I am currently working with a company out of Sacramento called QFN. They are helping me to educate the Real Estate Professionals in my areas with “what is?” and “how to use” the DST. The Deferred Sales Trust Strategy is not an exchange.

These Frequently Asked Questions should give you confidence in introducing a client or prospect to the idea of using a Deferred Sales Trust (DST) to eliminate current taxes on a sale.

Is this legal?

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.

What is a

Deferred Sales Trust?

A DST is a type of special sale that allows you to pay capital gains taxes over many years rather than immediately at the time of sale. Benefits include reliable income from the trust, starting when you decide to, flexibility in how the trust is invested, protection from lawsuits and creditors, the ability to borrow from the trust, and the fact that the assets can be arranged to pass to your beneficiaries estate and gift tax free.

What if I’ve sold already?

A Deferred Sales Trust only works if you haven’t closed escrow.

What if I’m in escrow now?

You can still use a Deferred Sales Trust to avoid current taxes, but you may need to delay the closing based on when you’re supposed to close.

How long does it take?

About as long as to close a normal escrow, but the process can be accelerated if needed

What are the advantages?

Avoid current taxes, pay taxes over time, lifetime income, protection from lawsuits and creditors, and no estate taxes to beneficiaries.

What are the payments?

They are calculated based on what you, the grantor, desire. Depending on your income goals and other objectives, the amount and length of term are your choice. You can have a free Illustration Request done that will show you the details.

Are taxes eliminated?

You eliminate taxes at the time of sale, and instead pay them over time, interest free.

Can I wait to take payments?

Yes, you can take payments asap, or wait until you need them, whichever works best for you.

When do I pay the taxes?

You will pay taxes on the income when payments are made by the trust.

How am I taxed?

Part of each payment is returned to you as a tax-free return of basis. The remainder is taxed partially as capital gains and partially as ordinary income. Some depreciation recapture may have to be accounted for as well, depending on the type of asset sold.

Who owns the trust?

In most cases, the trust is owned by family members or other trusted individuals.

Can the seller control the trust?

The seller may not be in direct control of trust investments. The seller may appoint an investment advisor like QFN who will manage any investments made by the trust.

Can I take a loan ?

A loan can be arranged from the trust to the seller for a fair interest rate.

Can additional properties be added to a DST?

Yes, additional property can be added to the trust after it has been established. Many clients decide to put multiple properties in the same trust, as each one is listed for sale.

Is there a limit to the amount transferred to a DST?

No. You may transfer any amount of assets to the DST in exchange for payment without causing a taxable event.

How long do payments last?

For as long as you decide – you establish the term.

Can I keep some cash?

Yes, you can keep some cash from a sale, but you pay the taxes on the cash you keep.

Can I get another opinion?

Yes, of course – we’ll be glad to provide detailed information specifically for your CPA, attorney, and/or tax advisor.

What else should I know?

Not all tax and financial strategies are suitable for all investors. You should always consult with your tax and financial advisors.

More Than Just Tax Savings

A Deferred Sales Trust is much more than just a way to avoid paying current taxes on the sale of a property. Because the proceeds of your property sale are invested via your trust, you’ll be earning interest on the entire amount of sale (rather than an after tax amount) immediately, and for as long as you live. That means the value of your trust will increase faster. And your trust will continue to grow in value if properly managed. Remember that your trust is set up, to ensure that the trust never runs out of money. That means, if properly managed, the trust asset will be worth more when passed to your beneficiaries than when originally established. And the assets are passed to your beneficiaries’ estate tax free!

Current Tax Deferral – Not Avoidance

The power behind the Deferred Sales Trust is that it is a very conservative tax strategy that will help you defer the taxes you have to pay on sales of your appreciated assets over your entire lifetime. The choice is yours and it is simple: Pay the taxes you owe immediately – OR – pay the taxes you owe over your entire lifetime, with a 0% interest-free loan from the IRS!

A Deferred Sales Trust allows you to avoid current taxable gains by deferring the entire gain over your lifetime!

I will be presenting this Deferred Sales Trust Strategy to an exclusive group of Top Producing Real Estate Professionals next week. I am anxious to hear their comments and responses. I personally feel that this is a great option for sellers that are concerned about their equity and having to pay so much tax at the time of their sale. What I am finding is that many in our Industry are not even familiar with this strategy, and so I am taking on the responsibility of letting my clients and readers know it’s out there.

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