Alabama Deferred Sales Trust Attorney

Have you considered selling an asset or business you have owned for a long time but worry about the capital gains taxes you will have to pay after a sale? For years, the ultra-wealthy have leveraged various legal strategies to manage and mitigate the tax consequences of selling high-value assets, such as deferred sales trusts. This tax strategy isn’t just for them, though — anyone, even you, can use it.

A lawyer from 453 Deferred Sales Trust Powered by Pennington Law can review your situation and help you set up a deferred sales trust that meets your specific needs. This approach — which we call “The Tax Tool You Didn’t Know You Had” — could potentially save you significant amounts in taxes and support your financial goals.

Contact us today to set up a free, no-obligation consultation with an Alabama deferred sales trust lawyer, and discover a better way to manage the tax implications of selling a business or high-value asset.

Why Choose 453 Deferred Sales Trust Powered by Pennington Law?

Due to the complexity of deferred sales trusts, working with an experienced attorney can help you avoid the challenges or pitfalls that may cause you to lose the tax benefits of a DST. Choose 453 Deferred Sales Trust Powered by Pennington Law to guide you through the process of establishing and managing a deferred sales trust because:

  • We offer an all-in-one service that includes handling legal and financial matters, such as trusts, financial reinvestment, and taxes. While other firms turn to outside professionals to handle specific complex issues in a client’s case, we have created an IRS-compliant program under one roof that allows us to provide you with comprehensive advice and advocacy.
  • We have extensive knowledge and experience in complex legal areas, such as tax law, estate planning, wealth management, asset protection, and insurance.
  • Firm principal Andre Pennington has become nationally recognized for his experience in tax, trusts, estate planning, and investment services. He has appeared in publications such as The New York Times, The Wall Street Journal, USA Today, and Forbes. He has also earned listings in Super Lawyers, Best Attorneys in America, and Lawyers of Distinction. Our practice was also recognized as the Best Deferred Sales Trust Law Firm in the U.S. of 2024 by Best of the Best.
  • We have the insight and skills to help you protect the value of your assets and the wealth you’ve worked hard to build.

What Is a Deferred Sales Trust and What Are Its Benefits?

So, what is a deferred sales trust? Also called an installment sale trust, a DST is a legal structure that allows an asset or business owner to sell their property or interests while managing or mitigating capital gains taxes imposed on the sale.

With a deferred sales trust, an asset or business owner must transfer their property or business interests to a trust in exchange for an installment payment agreement that defines how the trust will pay the owner from the sale proceeds. The trust then sells the asset or business to the ultimate buyer and holds the sale proceeds.

As long as the proceeds remain in the trust, the former owner owes no capital gains tax; they incur tax only on any portion of the proceeds distributed by the trust. Thus, a deferred sales trust can defer capital gains taxes indefinitely by paying a former asset/business owner only the income generated from reinvesting the sale proceeds.

Some of the financial benefits of DSTs include the following:

Owners can use deferred sales trusts to reinvest the sale proceeds from selling an asset or business, allowing them to continue growing their wealth.

The critical tax benefits of DSTs include deferring capital gains taxes, with taxes coming due only if the trust distributes principal from the sale proceeds. Oftentimes, we at 453 Deferred Sales Trust Powered by Pennington Law employ financial strategists that mitigate and, most times, eliminate the impact of the capital gains tax.

Deferred sales trusts offer 1031 exchange alternatives for property owners, providing several advantages over a 1031 exchange. Benefits of a deferred sales trust vs. 1031 exchange include flexibility in the timing of reinvestment and the types of assets one can place their sale proceeds in due to the lack of a “like-kind” requirement for DSTs.

Individuals and families can use deferred sales trusts to implement estate tax freezes, which can help qualify for estate tax exemptions.

By managing or mitigating capital gains taxes from asset or business sales, families can keep more of the wealth they’ve worked hard to build.

Deferred sales trusts offer significant flexibility to individuals and families as they pursue asset or business sales as part of the financial planning process.

Who Is a Deferred Sales Trust Best For?

Although traditionally used by wealthy individuals and families, people and families from a broader range of financial backgrounds have turned to deferred sales trusts to help them mitigate capital gains taxes. Examples of individuals who can benefit from a deferred sales trust include:

  • Business owners or people with partnership interests in businesses who want to sell their ownership interests while spreading out the tax effects of the sale over a long period
  • Investment property owners who want to avoid an immediate large tax bill caused by selling property — such as real estate, market investments, and cryptocurrency — that has significantly appreciated in value
  • Individuals nearing retirement who want to diversify their investments or shift their portfolio strategy without incurring taxes from selling existing assets or investments
  • People who want to sell high-value assets they’ve inherited while managing the taxes imposed on a sale

How Does a Deferred Sales Trust Work and How Is Income Generated?

A deferred sales trust allows an asset or business owner to defer capital gains tax and generate income by reinvesting the sale proceeds into new assets or investments through a process that involves:

  1. Transfer of Property or Business to the Trust – First, an asset or business owner must transfer what they want to sell to the trust. In exchange, the owner receives an installment payment agreement that describes how the trust will pay the owner from the sale proceeds.
  2. Trust Sells the Asset – The DST must sell the asset or business to the ultimate buyer.
  3. Sale Proceeds Held in Trust – The trust also receives the sale proceeds directly from the buyer and holds the proceeds in trust. The former owner owes no capital gains tax so long as the trust continues to hold the principal of the sale proceeds.
  4. Proceeds Invested – In many cases, an owner will structure a deferred sales trust to reinvest the sale proceeds into other income-generating investments, with the trust paying that income to the former owner per the installment payment agreement. This allows you to grow the proceeds through various investment strategies while still deferring and, most times, eliminating capital gains tax consequences.
  5. Installment Payments to the Investor – The installment payment agreement governs when the trust must distribute principal and income from the sale proceeds to the former owner and how much money the owner will receive. The owner pays capital gains tax only on that portion of the principal from the sale proceeds distributed by the trust. Your capital gains tax liability will spread and, most times, be minimized over a period of time, rather than your having to pay it all at once.

What Are the Requirements for a Deferred Sales Trust?

A deferred sales trust will provide an asset owner with tax benefits only if it meets specific legal requirements, including:

A deferred sales trust must have a bona fide third-party trustee unaffiliated with the asset owner.

The trust must receive the sale proceeds directly from the buyer or a third-party intermediary like an escrow agent; the asset owner cannot have any beneficial interest in the proceeds.

The owner must create the trust before entering a purchase and sale agreement with the ultimate buyer of the owner’s asset/business.

When an owner transfers their asset or business interest to the deferred sales trust, they must receive due compensation in the form of an installment payment agreement.

What Assets Are Suitable and Eligible for a DST?

Individuals and families have recently begun to use deferred sales trusts to manage tax liabilities from the sale of various types of assets, such as:

  • Business sales
  • Business ownership interests, including partnership/membership units
  • Real estate
  • Securities
  • Cryptocurrency
  • Stocks, bonds, and other investments
  • High-value collectibles

What Our Alabama Deferred Sales Trust Attorneys Can Do

Are you interested in how a DST can facilitate the sale of an appreciated asset or a business interest? If so, 453 Deferred Sales Trust Powered by Pennington Law can help you protect your wealth and legal interests. Our firm will guide you through the planning process by:

Our attorneys will thoroughly evaluate your present financial situation and the proposed asset/business sale to provide you with tailored legal advice.

We will also ensure we understand your financial and estate planning goals to confirm that a DST will best serve your objectives.

We recognize that errors in forming a DST may cause you to lose critical benefits. Our experienced attorneys know what steps to take to ensure your trust meets all legal requirements so you avoid an unexpected tax bill with fees, interest, and penalties.

We will ensure that your DST serves your specific needs and goals, whether those involve spreading capital gains taxes over a multi-year period or deferring taxes indefinitely by receiving only the income generated by reinvesting sale proceeds.

Contact an Alabama Deferred Sales Trust Attorney Today

If you’re thinking of selling a significant asset, we at 453 Deferred Sales Trust Powered by Pennington Law can help you manage the tax consequences and protect your wealth. Let an Alabama deferred sales trust attorney from our firm advise you on the suitability of a deferred sales trust for your estate or financial planning needs. Contact our firm today for a free, confidential consultation to learn more about us and the DST strategies we can use for you.