What is a deferred sales trust?

A Deferred Sales Trust (DST) is a legal strategy used to defer capital gains taxes on the sale of appreciated assets, such as real estate or business interests.

In a DST, the seller enters into an agreement with a third-party trust company, which takes possession of the proceeds from the sale of the assets. The seller can then receive regular payments from the trust over a specified period of time, allowing them to defer paying taxes on the gain from the sale.

DSTs are often used by individuals who are looking to sell highly appreciated assets, but want to avoid the substantial tax burden that can come with such transactions. By utilizing a DST, sellers can potentially defer paying taxes for a number of years, allowing them to reinvest the proceeds from the sale and potentially earn a higher return.

It is important to note that DSTs are complex financial instruments and should be considered carefully with the advice of a qualified financial and legal professional. Additionally, DSTs may not be suitable for every situation, so it is important to carefully evaluate the potential benefits and risks before entering into a DST agreement.