As the owner of one or more highly appreciated assets, you may have heard about the Deferred Sales Trust (DST), the innovative strategy that allows you to defer the substantial capital gains taxes you usually face when you sell one of these assets. Some of what you may have heard, however, could be inaccurate.
Estate Planning Team
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.
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Avoiding capital gains tax may be the primary selling point of a Deferred Sales Trust, yet it is not the only benefit. Furthermore, some may even argue that deferring taxes is not even its best feature, considering the flexibility you have when structuring the trust.