All You May Need To Know About Delaware Statutory Trusts And 1031 Exchanges
The Delaware Statutory Trusts also known as DST are, as can be told by the name, state entities established under the state laws of the state of Delaware and as such operate as legal entities. A DST is especially established for real estate investment purposes and is more specifically targeting the 1031 exchanges.
Under this statutory trust, the investors all own a pro rata share of the DST. The Delaware Statutory Trust will then hold title in real estate interests and whenever there is income earned from the real estate investments it holds trusts in, the investors will receive income shared and appropriated to them as per their share allocations in the DST.
The DST operates in such a manner as to free the investor of the responsibility of taking decisions relating to the investment as it always has a trustee who is charged to oversee these on their behalf. Mark this other yet very important fact about the trusts which is concerned with their taxable position and they are considered as entities which are non-taxable which therefore means that the profits and losses accrued from the trusts are passed through to the investors.
Looking at their standing in relation to the 1031 exchanges, you will notice that there is a determination that considers the interests in DST as identical to interests in direct real estate investment. The essence of all this is that your DST held properties are qualifying for 1031 exchanges for as long as you have them satisfying the other demands for the same exchanges. Thus we can say that the investors who wish to get into real estate holdings and want to stay away from the responsibilities of making decisions and the management duties they have a very suitable option in the DST to invest in this market. Following are some of the advantages attracting a number to DST’s.
One of the main benefits of the DST is the idea that it allows the investors an opportunity to hold a share in a property which is securitized.
The other benefit of the DST is the fact that it eliminates the requirement for a unanimous approval. The decision making over the property held under the DST lies in the powers of the signatory trustee and as such relieving the investors of the responsibility over the property so held.
One more benefit of the DST’s is the element of the limits it gets to cases of liability. Where there is the trust going bankrupt, the liability resting on the investors is limited to their investment in the trust and not any liability past this is legal.