From time to time a Seller of an appreciated business or property, who is interested in the Deferred Sales Trust (DST) will comment that the legal costs associated with setting up the DST are too high. But are they?
A Deferred Sales Trust can be a fantastic tool for minimizing your tax obligations and investing the savings to build your wealth. Yet, any method for making money carries risk with it, and a DST is no different.
DSTs, or Deferred Sales Trusts, are taking the investment world by storm. This flexible investment opportunity allows you to sell assets and avoid paying taxes on capital gains. This can potentially result in millions of dollars saved, depending on the size of the gains. Even smaller investments can see big returns: capital gains tax can take over 20% of your gains away, depending on the situation.
Although modern trust law traces back to feudal England in the 1100s, citizens of the Roman Republic secretly used an oral agreement called “fideicommissum” (something committed to one’s trust) to work around civil succession laws. This way, they could leave wealth or property to those considered as lower-class, including foreigners, slaves, couples without children or unmarried individuals — an act that was punishable by death.
There is rarely a single person behind any wealth management strategy, and a Deferred Sales Trust is no different.
A DST has two beneficial uses: First, it allows you to structure an asset sale to defer the capital gains tax payments indefinitely. Second, it provides a vehicle for you to invest the full proceeds to best suit your financial and lifestyle objectives.