Arizona Deferred Sales Trust Attorney

The decision to sell an asset that has gained value during your ownership, such as business interests or real estate, can lead to worries about the sale’s tax implications. Few people know about the legal strategies that the ultra-wealthy have long used to manage tax liabilities from selling appreciated assets or wealth transfers, such as deferred sales trusts.

But what is a deferred sales trust? This legal instrument may be “The Tax Tool You Didn’t Know You Had.” Contact 453 Deferred Sales Trust Powered by Pennington Law today for an initial evaluation with an Arizona deferred sales trust attorney. We’ll help you understand what DSTs are about and how they could be suitable to your financial situation.

Why Choose 453 Deferred Sales Trust Powered by Pennington Law?

Using a deferred sales trust to manage the tax consequences of selling an appreciated asset requires in-depth legal knowledge and experience to ensure you receive the tax benefits of a DST. Turn to the legal team from 453 Deferred Sales Trust Powered by Pennington Law to walk you through the process of evaluating and setting up a DST. We stand out as your best choice because:

  • Our firm offers an all-in-one approach. We handle all kinds of legal and financial matters for clients, including trust formation and management, financial investments, and taxes. Whereas other firms may turn to outside professionals to assist with aspects of a client’s case, we’ve created an IRS-compliant program under one roof, enabling us to tackle all the issues and challenges you may face.
  • Our lawyers have extensive experience and knowledge in complex areas of law, such as taxes, estate planning, financial and wealth matters, fiduciary duties, insurance, and asset protection.
  • Firm founder Andre Pennington has become nationally recognized for his unparalleled knowledge of tax, trust, estate, and asset protection law, receiving listings in preeminent publications like The New York Times, The Wall Street Journal, Forbes, USA Today, Super Lawyers, Lawyers of Distinction, and Best Lawyers in America. Our practice was also recognized as the Best Deferred Sales Trust Law Firm in the U.S. of 2024 by Best of the Best.

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

A deferred sales trust, sometimes called an installment sale trust, is a legal structure that a person may use to manage or mitigate tax liabilities after selling an asset.

When a person sells an asset like a business, stock market investment, or real estate, they must pay taxes on the asset’s value growth during their ownership. However, a deferred sales trust can enable a person to defer capital gains taxes by having an appropriately structured trust take ownership of the asset, sell it, and manage the sale proceeds.

Some of the top financial benefits of DSTs include the following:

Tax benefits of DSTs include allowing investors to defer capital gains taxes indefinitely after selling their assets/investments. With a DST, an investor only pays capital gains taxes when the trust distributes some portion of the principal of the asset sale proceeds.

DSTs provide valuable and practical 1031 exchange alternatives. Some differences between a deferred sales trust vs. a 1031 exchange include time limitations on selling and reinvesting assets and flexibility in reinvesting sale proceeds.

In some cases, an individual or family can use a deferred sales trust to implement an estate tax freeze, which may reduce the value of a person’s estate or defer appreciation in asset value to future generations.

By deferring or mitigating capital gains taxes, families can preserve more of the wealth they generate from selling valuable assets. Families can reinvest sale proceeds to defer taxes indefinitely while growing their wealth through those investments and enjoying the income they generate.

DSTs allow asset owners greater flexibility in preserving the value of their assets upon a sale, allowing those individuals to control their finances.

Who Is a Deferred Sales Trust Best For?

Various individuals may benefit from using a deferred sales trust as part of the process of selling assets that might trigger capital gains or other taxes, such as:

  • Business owners or partners considering selling their company or ownership interest who want to spread out capital gains taxes over multiple years.
  • Owners of investment properties that have appreciated who want to sell those properties — including market investments and cryptocurrency — without incurring significant capital gains taxes in the year of the sale
  • Individuals close to retirement seeking to sell specific valuable assets to diversify their investments without losing some of the value of their assets to taxes
  • Individuals who have received inheritances and wish to sell high-value assets while mitigating the potential tax effect

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

A properly structured deferred sales trust that allows an asset owner to defer payment of capital gains taxes on the sale of the asset will follow several steps:

  1. Transfer of Property or Business to the Trust – After creating the trust, the asset owner must transfer the asset they intend to sell to the trust; the owner cannot retain any beneficial interest in the assets or the proceeds of its sale. In return, the owner receives an installment payment contract that entitles the owner to payments from the sale proceeds or income generated by investing the sale proceeds; the owner becomes a trust creditor rather than a beneficiary.
  2. Trust Sells the Asset – Upon taking ownership of the asset, the trustee must sell it to a bona fide third party for the same price the owner sold it to the trust.
  3. Sale Proceeds Held in Trust – The trustee receives the sale proceeds from the buyer or an intermediary and then holds and manages the proceeds per the terms of the trust.
  4. Proceeds Invested – Often, a trustee will invest the sale proceeds to generate income. The trustee can use this income to pay trust administration expenses or make distributions to the asset owner as required by the installment payment contract. 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 investor/former asset owner may receive payments of principal from the sale proceeds, which trigger capital gains taxes in proportion to the amount of principal received by the investor or payments of income generated by the trust’s investment of the sale proceeds. 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 can offer the asset owner tax advantages when selling an asset that has appreciated. However, the trust must first meet several legal requirements, including:

A deferred sales trust must have a bona fide third-party trustee. This means that the asset owner cannot control or influence the trustee and must not retain any beneficial interest or control over the trust or its assets.

The trust must receive full title and interest in the asset sale proceeds directly from the buyer or a third-party intermediary like an escrow agent. The asset owner cannot take title to or receive any interest in the sale proceeds.

An asset owner must establish the deferred sales trust before selling the asset to the ultimate buyer.

The asset owner must receive due compensation in the form of an installment payment contract. The trust must also sell the asset(s) for the same price the owner sold it to the trust.

What Assets Are Suitable and Eligible for a DST?

Today, individuals and families from all financial backgrounds can benefit from using a deferred sales trust to manage or mitigate tax liabilities from an asset sale. Examples of assets you might liquidate through a deferred sales trust include:

  • Business assets
  • Business ownership interests
  • Real estate
  • Securities
  • Cryptocurrency
  • Stocks, bonds, and other investments
  • High-value collectibles, such as artwork, memorabilia, or rare vehicles

What Our Arizona Deferred Sales Trust Attorneys Can Do

The deferred sales trust lawyers from 453 Deferred Sales Trust Powered by Pennington Law can help you manage and mitigate the tax consequences of an asset sale by:

Understanding your specific financial situation and the asset(s) you plan to sell to begin evaluating appropriate legal solutions.

Is a deferred sales trust the right tool to help you meet your goals and needs. Our professionals can discuss your objectives to determine whether a DST can best help you manage your finances.

Using our extensive legal knowledge and experience, we can set up your deferred sales trust correctly, ensuring you avoid mistakes that may result in paying capital gains taxes upfront, losing the trust’s tax benefits, getting an immediate tax bill, and facing additional penalties, fees, and interest on taxes.

We want to help you meet your specific financial goals, such as paying sale proceeds over a schedule to minimize the burden of capital gains taxes or deferring taxes indefinitely by only paying income from reinvested proceeds. With us in your corner, we can create a DST that serves your financial objectives. These could include managing and mitigating capital gains taxes from an asset sale or avoiding such taxes by taking only the income generated from investing 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.

Contact an Arizona Deferred Sales Trust Attorney Today

Before you sell a high-value asset like real estate or a business, talk to an Arizona deferred sales trust lawyer about the suitability of a DST for managing the tax implications of your asset sale. Contact 453 Deferred Sales Trust Powered by Pennington Law today for a confidential consultation with our legal team. With us as your trusted guides, you can discover how personalized DST strategies can protect and manage your family’s wealth.