Delaware statutory trust (DST) is a legally recognized trust that is formed as a private governing agreement under which property is held, managed, administered, invested, and/or operated. It's used as replacement property by investors seeking to defer their capital gains taxes through a 1031 exchange. If you’re doing it for the first time, it may seem confusing. You probably have a lot of questions or misconceptions about a DST. We have created this page to answer all your questions and to address any misconceptions.

Basic FAQ’s

Does it need to be in Delaware? 

Let's get the obvious out of the way, you don't need to live or have property in Delaware. You just need to set it up with the Delaware Division of Corporations. DST's are recognized in California and they function similar to series LLC. The biggest difference is that a DST is not subject to California franchise taxes (which goes for $800 a year minimum).

How to Start a DST?

To form a Delaware statutory trust, a private trust agreement must be developed by all involved parties to ensure that individual interests are protected. Once the agreement is completed, a Certificate of Trust can be obtained from the Delaware Division of Corporations.

How Does a 1031 Exchange Work?

This page will tell you everything you need to know about a 1031 exchange.

What are the Advantages of a 1031 DST?

One of the biggest advantages of a DST is that (as a separate legal entity) it offers liability protection for the trustee and asset protection for the beneficiaries. It has a low minimum investment requirement while cash investors can use it to complete a 1031 exchange. 

What are the Disadvantages of a 1031 DST?

Two of the biggest disadvantages of a DST are having to hold on to a property for years and the lack of direct control. Investors must hold on to the property for years to qualify for a 1031 DST, thus you will not be able to sell the property if you need to liquefy assets. Since the DST is a blind trust, you the investor can't have direct control over how its managed. 

Reach out to us if you don’t see the answer to your question or would like additional information about 1031 Delaware Statutory Trust.