Delaware Statutory Trust
A Delaware Statutory Trust (DST) is a legal entity formed under Delaware statutory law, primarily used for business, investment, and estate planning purposes. In real estate, DSTs are commonly utilized for property ownership and management, especially in 1031 exchanges.
Key characteristics of a DST include:
1. Limited Liability-Like other forms of trusts, DSTs provide limited liability protection to investors, shielding them from personal liability beyond their initial investment.
2. Pass-through Taxation-Similar to partnerships, DSTs are not subject to entity-level taxation. Instead, income, gains, losses, and deductions flow through to the individual investors, who report them on their personal tax returns.
3. Multiple Beneficiaries-DSTs can have numerous beneficiaries, allowing investors to pool their funds to acquire and manage real estate properties collectively.
4. Trustee Management-A trustee is appointed to manage the DST’s affairs, including property acquisition, leasing, and disposition. Investors typically have little to no involvement in day-to-day management decisions.
5. Limited Life-DSTs have a predetermined termination date, after which the trust is dissolved, and the underlying assets are either distributed to beneficiaries or sold.
Overall, DSTs offer investors a flexible and tax-efficient vehicle for participating in real estate investments while enjoying limited liability and potential appreciation in property values.