Michigan Deferred Sales Trust Attorney

Do you own an asset or business interest that has grown in value during your ownership? When you go to sell that asset, you may lose some of the value growth to capital gains taxes. However, many people may not realize that the ultra-wealthy have leveraged legal strategies to mitigate the tax consequences of high-value asset sales. One of them is a deferred sales trust, which to many is “The Tax Tool You Didn’t Know You Had” — and you can have it.

At 453 Deferred Sales Trust Powered by Pennington Law, we’ve helped people like you make it a beneficial part of their financial or estate planning arsenal. Contact our firm today for a free, no-obligation consultation with a Michigan deferred sales trust lawyer to learn more.

Why Choose 453 Deferred Sales Trust Powered by Pennington Law?

Establishing a deferred sales trust involves complex tax and estate laws. As a result, you can ensure the correct structuring of your DST by working with an experienced deferred sales trust attorney. For years, individuals and families have chosen 453 Deferred Sales Trust Powered by Pennington Law to help them manage the tax effects of asset or business sales because:

  • We provide an all-in-one service to handle various legal and financial matters for clients, such as trusts, financial investments, and tax filings. Unlike other firms that rely on outside professionals to handle specific issues in clients’ cases, we’ve built an IRS-compliant program under one roof to offer you comprehensive legal and financial counsel.
  • Our lawyers have deep knowledge of complex areas of the law, including estate and financial planning, asset protection, insurance, and taxes.
  • Firm founder Andre Pennington has achieved national recognition for his extensive legal knowledge and experience in tax, trust, and investment law, appearing in publications such as The New York Times, The Wall Street Journal, Forbes, and USA Today. Our practice was also recognized as the Best Deferred Sales Trust Law Firm in the U.S. of 2024 by Best of the Best.
  • Our firm will work tirelessly to help you maximize and protect the wealth you’ve worked hard throughout your career to build.

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

So, what is a deferred sales trust (DST)? Sometimes called an installment sale trust, a DST is a legal structure that allows an asset or business owner who wishes to sell their interest to manage capital gains taxes imposed on such a sale.

With a deferred sales trust, an asset owner places their property into a trust in exchange for receiving an installment payment contract, which governs the owner’s right to payment from the proceeds of the asset’s sale. The trust then sells the asset to a buyer and receives the sale proceeds. A deferred sales trust allows an asset owner to defer capital gains taxes on the sale by holding the sale proceeds.

The owner only pays capital gains tax on any portion of the sale proceeds distributed by the deferred sales trust as required by the installment payment contract. Alternatively, an owner may structure a deferred sales trust to invest the sale proceeds and only pay income generated from those investments, allowing an owner to defer capital gains taxes indefinitely.

Some of the top benefits of deferred sales trusts include:

Deferred sales trusts mitigate the tax liability of an asset sale, including by spreading the income over several years. Thus, the seller can offset the income against other capital losses or avoid taxation indefinitely as long as the trust maintains the 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 provide one of the 1031 exchange alternatives. Advantages of a deferred sales trust vs. 1031 exchange include no limitations on reinvesting sale proceeds, as DSTs do not have a “like-kind” requirement, and eased restrictions on the timing of reinvestments to obtain tax benefits.

An individual can use a deferred sales trust to effect an estate tax freeze, which can help bring estate values below tax exemption thresholds or pass asset value appreciation to subsequent generations.

Families may use deferred sales trusts to manage or mitigate tax liabilities from asset sales, allowing families to preserve more of their hard-earned wealth.

Asset owners can use deferred sales trusts to continue growing the value of their investments by reinvesting sale proceeds.

Managing and mitigating capital gains taxes from asset or business sales provide owners with more flexibility in their financial planning options, including diversifying portfolios by reinvesting money from selling high-value assets without reducing value due to taxes.

Who Is a Deferred Sales Trust Best For?

Individuals and families from various financial backgrounds can benefit from a deferred sales trust. Examples of people who might seek the financial benefits of DSTs include:

  • Business owners who plan to sell their company or ownership/partnership interest and want to spread out the tax on their sale over a period of years
  • Owners of investment properties — such as multi-family or commercial properties, as well as market investments and cryptocurrency — that have increased in value, when those owners want to sell those properties without incurring a significant upfront tax bill
  • Individuals nearing retirement who want to sell high-value assets to diversify their portfolio or change their investment strategy but do not want to lose the growth in value of their investments to taxes
  • People who inherit high-value assets they want to sell while managing the tax consequences of a sale

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

The operation of a deferred sales trust involves several steps to enable an asset owner to defer capital gains tax and, if desired by the asset owner, receive the income generated by reinvesting the process of the asset’s sale. Steps in operating a deferred sales trust include:

  1. Transfer of Property or Business to the Trust – First, an asset owner must transfer ownership and title of the asset or business they wish to sell to the trust. The owner may not retain any beneficial interest in the asset; instead, the owner receives an installment payment contract describing how the trust will pay the owner for the asset via the principal distribution and income from the sale proceeds.
  2. Trust Sells the Asset – After taking ownership of the asset, the trust will sell it to its ultimate buyer and receive the sale proceeds from the buyer or an intermediary.
  3. Sale Proceeds Held in Trust – The trust must continue to hold the sale proceeds, making distributions only as required by the trust document and the installment payment contract with the former asset owner.
  4. Proceeds Invested – In many cases, a trustee of a deferred sales trust will invest the sale proceeds to generate income. 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 former asset owner will receive periodic payments from the sale proceeds or income generated from reinvesting 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?

Obtaining the tax benefits of DSTs requires the trust to meet specific legal requirements, including:

An asset owner may not have any control or influence over the trustee of their DST, which precludes family members or business affiliates from serving; instead, a DST must have an independent third-party trustee.

All proceeds from an asset or business sale must go directly from the buyer or a third-party intermediary like an escrow agent to the DST; the asset owner may not have any ownership of or beneficial interest in the sale proceeds.

An asset owner must form their DST and place the asset under the trust’s ownership before selling it to the asset’s ultimate buyer.

A deferred sales trust must sell the asset for the same price the asset owner sold it to the trust under the installment payment contract.

What Assets Are Suitable and Eligible for a DST?

With more people turning to a DST to help them manage or defer capital gains tax after an asset or business sale, deferred sales trusts have proven helpful in managing tax liabilities from the sale of assets such as:

  • Business sales
  • Business ownership interests
  • Real estate
  • Securities
  • Cryptocurrency
  • Stocks, bonds, and other investments
  • High-value collectibles

What Our Michigan Deferred Sales Trust Attorneys Can Do

When you turn to 453 Deferred Sales Trust Powered by Pennington Law for help with financial and tax planning as part of an asset or business sale, you can expect our legal team to help you protect your interests and wealth by:

  • Reviewing your financial circumstances and the terms of your proposed asset/business sale
  • Sitting down with you to discuss your needs and concerns to evaluate the suitability of a deferred sales trust for your financial goals
  • Structuring your deferred sales trust to ensure you receive the tax benefits you desire and that serve your financial objectives, such as managing taxes from a sale or deferring tax liability indefinitely by receiving only income from reinvesting sale proceeds

Contact a Michigan Deferred Sales Trust Attorney Today

Before you sell a business or high-value asset, talk to a Michigan deferred sales trust attorney from our firm. We’ll review your financial situation to assess how a DST could protect your family’s wealth and how our DST strategies can help you manage or mitigate the tax consequences of a transaction. Contact 453 Deferred Sales Trust Powered by Pennington Law today.