Choosing The Appropriate Delaware Statutory Trust In 1031 Exchange 

With the rise in popularity of the Delaware Statutory Trust, there are a lot of options to consider when Choosing The Approriate Delaware Statutory Trust. Over the past 5-10 years we have seen a large demand for the use of the Delaware Statutory Trust in 1031 exchanges because of the deferral of capital gains tax. 5-10 years ago, the Delaware Statutory Trust was not well known. We spent a lot of time educating our clients on what a  Delaware Statutory Trust (DST) is, how it works, the pros, the cons, choosing the approriate Delaware Statutory Trust etc. In todays market, we have noticed that a lot of real estate investors have heard of, or are educated on the Delaware Statutory Trust. Real estate investors are now looking on info for choosing the appropriate Delaware Statutory Trust with all the different DST companies and investment advisors out there offering different portfolios from multiple sponsors. In this article we will discuss some key points to consider when choosing the approriate Delaware Statutory Trust.  If you click the link above it will direct you to a full  Delaware Statutory Trust guide that can provide a full explanation of everything 1031 DST. This article will help give a shorter insight on the topic of choosing the appropriate Delaware Statutory Trust.  If you have questions after reading this article about choosing the appropriate Delaware Statutory Trust, please feel free to fill out the form below or call our office directly at 805-583-2720. 

Points To Consider When Choosing The Appropriate Delaware Statutory Trust

• Delaware Statutory Trust Company
• Diversification & Over Diversification 
• Track Record Of Delaware Statutory Sponsor 
• Asset Type & Class of Real Estate
• Fees Associated With Delaware Statutory Trust Portfolio 
• Distribution Rates
• Holding Time of Delaware Statutory Trust Real Estate 
• Tax Statements 
• Distribution of Income
• Short Term & Long Term Investment Goals
• Estate Planning
• Replacing Debt & Leveraged Portfolios 
• Qualified Intermediary 

These are just a few of the things to consider when choosing the appropriate Delaware Statutory Trust in your 1031 exchange. There are many factors to consider when choosing the appropriate Delaware Statutory Trust for you and your family in your 1031 exchange. We will expand on these points in the following paragraph to help you consider the right DST for you in your exchange. If at anytime you feel that you have more questions about choosing the appropriate Delaware Statutory Trust, please fill out the form below or call our office at 805-583-2720 to speak to a representative. 

Choosing The Appropriate DST Requires A Lot Of Important Factors

As we have outlined above on some of the key points when choosing the approriate Delaware Statutory Trust for you in your 1031 exchange, we will expand on some of these points for more clarity. When looking to choose the appropriate Delaware Statutory Trust, the DST sponsor is a big factor when it comes to your 1031 exchange. Choosing the appropriate Delaware Statutory Trust company will touch on a lot of the bullet points aforementioned above. Choosing the approriate Delaware Statutory Trust company could be overwhelming with all the DST sponsors available, and the marketing that we are seeing online. A wise man once said, there are good doctors, and there are bad doctors. There are good lawyers, and there are bad lawyers. There are good police officers, and there are bad police officers. There are good CPA's, and there are bad CPA's. The same can be said about DST companies. We are seeing a lot of DST companies trying to get real estate investors to 1031 exchange into their DST portfolios, without providing a full spectrum analysis of everything to consider when choosing the appropriate Delaware Statutory Trust portfolio. Real estate investors are not being informed on everything that should be considered when discussing a DST. In most circumstances, many real estate investors are just looking at the current distribution rate of the dst portfolio. Although distribution may be an important factor when choosing the most approriate Delaware Statutory Trust to replace income from the investment property, there are many factors that can affect distribution rates. The private placement memorandum or (PPM) will disclose the starting distribution rate, and the projected distribution rate over an estimated 10 year holding time. Some DST companies are projecting a high starting distribution rate, but decreasing the cash on cash returns over a 10 year holding time. High front end load fees is a strategy used to pay high distribution rates, but can affect your potential for appreciation potential when the DST property is sold. When choosing the most approriate Delaware Statutory Trust, the sponsor full cycle track record of properties acquired and sold should be a factor to consider. If a DST company has not been around long enough to have purchased and sold DST properties, this should be considered when reviewing DST sponsor. A long standing track record of full cycle properties shows that the company can achieve its goals and projections. DST companies will report their full cycle properties within the PPM.  Our goal at Winthco Wealth Management is to provide full education on the DST, present all available DST portfolios from different DST companies, and help clients understand what to look for when choosing the appropriate Delaware Statutory Trust in their exchange. If you have questions that aren't answered in this article, please fill out the form below or call our office at 805-583-2720 to speak to a representative. 

**The properties depicted here are representative examples of the types of property that can be owned within a DST. They are not intended to depict or represent any particular investment offering.

Tax Considerations When Choosing The Right Delaware Statutory Trust

One of the top reasons when choosing a Delaware Statutory Trust is the tax deferral benefits of capital gains. While the DST can provide passive monthly income, appreciation potential, and deprecation benefits, the DST should be looked at from a tax deferral tool. The goal for every client should be diversification by DST company, asset class, and location, there is such a thing called over diversification. When you receive income from a DST, you should consider the state that the property is being held in, how many properties are in the DST portfolio, and the state income tax when choosing the appropriate Delaware Statutory Trust. If the DST property is located in a taxable state, the investor is required to pay tax on the income they receive. This is taxed at ordinary income rates, and you must report this to the IRS by filing a multistate income tax return. If you choose a DST portfolio like a self storage portfolio, there could be anywhere from 5-20 properties in multiple taxable states. Overdiversification can result in a costly income tax return when having to file tax returns in a plethora of states. We review and analyze each clients 1031 exchange case and look to achieve diversification without hindering the true potential income from over diversification and the costly tax return associated with over diversification.  Year end tax reporting should be considered when choosing the right Delaware Statutory Trust company to invest in. We handle a lot of clients DST tax returns, and we are seeing a lot of incorrect year end tax reporting from DST companies. It is critical that the income you receive, match what the DST company is reporting.  If there is a discrepancy, you could be put at audit risk with the IRS. Replacing debt, or picking up debt in your 1031 exchange is a factor to consider when choosing the right Delaware Statutory Trust. If you sold a property that was debt free, and 1031 exchange into a leveraged DST portfolio, you must be aware that any subsequent 1031 exchange requires that you replace that debt. If you decide to 1031 exchange out of a DST, you must finance the replacement property with an equal ore greater amount of debt to avoid taxation.  If you sold a property with debt, and looking to 1031 exchange into a DST, you must find a portfolio that is leveraged with an equal or greater LTV in your exchange. If the debt is not replaced, this is considered "boot" to the IRS and is taxable. As you can see, there are a lot of things to consider when choosing the right Delaware Statutory Trust. We help to educate our clients on all of these factors in their 1031 exchange. If you have more questions that we can answer for you, we welcome a phone call - 805-583-2720 or fill out the form below to speak to a representative. 

* Diversification does not assure or guarantee better performance/profit and cannot eliminate the risk of investment losses
in declining markets.