Have you ever wondered what you’ll experience after implementing the Deferred Sales Trust (DST), the legal, tested and proven strategy for selling your highly appreciated assets without falling victim to vicious long-term capital gains taxes and exorbitant income taxes?
Let’s take a look at just some of the things this unique, proprietary form of installment sale will allow you to experience.
Without advance planning, you will pay a long-term capital gains rate of 20% on any profit that pushes your total adjusted gross income above $517,200 if you’re a married taxpayer filing jointly. In addition, you’ll pay State Income Taxes and if the sale pushes your adjusted gross income above $250,000 you will face an additional 3.8% Obama Care Tax. Be extra careful if you have only owned your appreciated asset for less than a year before it is sold as you could be subject to ordinary income taxes of up to 37%. Utilizing the DST eliminates both of these immediate tax liabilities. Neither you nor your DST are taxed on the sale, and in fact, defers them almost indefinitely. You thus save hundreds of thousands of dollars.
Most assets, such as your business, real estate investments, or high value collectables, are illiquid in nature. Utilizing the DST allows you to convert these illiquid assets into liquid ones.
Your DST also reduces your risk of overexposure in a single asset class. You can instruct your Reef Point Independent Certified DST Trustee to invest in any “prudent investment” of your choice, including any and all of the following:
- Equity funds
- Real estate
- Life insurance
Also keep in mind that your DST makes it possible for you to buy these new investments with money that you would otherwise have paid to Uncle Sam.
Income When and How You Want It
When you sell your highly appreciated asset to the DST, you receive a secured installment sale note, i.e., promissory note, in return. You can direct both the term and the payout structure of this note. This can be especially helpful for your retirement planning. For instance, you can choose to receive no payments at all while you’re still working and begin receiving them once you retire.
1031 Exchange Alternative
If you’re selling real estate, your DST frees you from having to utilize a 1031 exchange, with all of its inherent requirements and strict time frames, in order to receive favorable tax treatment. In other words the DST is the perfect alternative to a 1031 exchange. Believe it or not, it can even rescue you from a failed or failing 1031 exchange.
Furthermore, unlike a 1031 exchange, if the real estate you’re relinquishing is an interest in a partnership or other ownership group, your DST allows you to split away from your partners if you so choose and still receive the favorable tax treatment.
Enhanced Estate Planning
If you choose to implement the DST Plus, sometimes referred to as DST 2.0, you have the opportunity to move its funds outside of your taxable estate, thereby eliminating what could be a 40% federal estate tax if your estate is a large one.
How to Begin the DST Process
If you’d like to experience all of the above DST benefits and more, it’s easy to begin the process. Simply contact Reef Point today.