Minnesota Deferred Sales Trust Attorney

Do you have an asset, piece of property, or business interest you wish to sell? If so, you’re probably worried about paying the capital gains taxes imposed on such a sale. However, for years, the wealthy have used various legal strategies to manage or mitigate the tax consequences of investment transactions. One of them is the deferred sales trust, a powerful money-saving legal tool that is no longer just for the 0.1 percent. In fact, it could be “The Tax Tool You Didn’t Know You Had.”

Would you like to know about the benefits of a DST and whether one could be suited for your estate or financial planning needs? Contact 453 Deferred Sales Trust Powered by Pennington Law today for a free, no-obligation initial evaluation with a knowledgeable Minnesota deferred sales trust lawyer.

Why Choose 453 Deferred Sales Trust Powered by Pennington Law?

Deferred sales trusts leverage complex tax and trust laws. Hiring an experienced attorney can ensure your trust meets legal requirements to protect your eligibility for a DST’s tax benefits. Choose 453 Deferred Sales Trust Powered by Pennington Law to help you evaluate the suitability of a DST for your needs and structure the trust to your goals because:

  • Our firm provides an all-in-one service. We handle numerous legal and financial planning matters for clients, including trusts, trustee duties, reinvestments, and taxes. Whereas other firms rely on outside professionals to handle various aspects of their clients’ needs, we’ve built an IRS-compliant program under one roof to ensure we offer you comprehensive service.
  • Our attorneys have extensive knowledge and experience in complex areas of law, including tax, estate planning, financial advising, wealth and fiduciary matters, asset protection, and insurance.
  • Firm founder Andre Pennington has achieved national recognition for his knowledge of tax, trust, and estate law and investment services. His clients have praised him for his financial planning work. Andre has received recognition in publications like USA Today, The Wall Street Journal, The New York Times, and Forbes and has made top lists issued by Super Lawyers, Lawyers of Distinction, and Best Attorneys 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.
  • Our team will take the time to understand your needs, concerns, and goals to help you preserve the value of your investments and protect your life’s hard work.

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 allows a property or business owner to manage the taxes imposed on the growth in value of a property or business interest when the owner sells that asset.

With a deferred sales trust, an individual places an asset or business they wish to sell into a trust. In exchange, the trust gives the individual an installment payment contract outlining how the trust will pay the individual from the sale proceeds. The trustee then sells the asset to a buyer and receives the sale proceeds. The trust can reinvest the sale proceeds and pay the former owner principal and income per the installment payment contract.

Some of the benefits of using a deferred sales trust to sell an asset or business include:

The primary tax benefits of DSTs include allowing property or business sellers to defer capital gains taxes. With a DST, an owner only pays capital gains taxes when they receive a payment from the principal of 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.

Among the financial benefits of DSTs, owners who sell their assets may choose to have the sale proceeds reinvested by the trust, allowing individuals and families to continue growing their wealth.

DSTs provide property owners with 1031 exchange alternatives. Benefits of a deferred sales trust vs. 1031 exchange include greater flexibility on the timing of reinvestment of sale proceeds and greater flexibility in how the trust may reinvest the proceeds, as a DST does not have a 1031 exchange’s “like-kind” requirement.

DSTs enable individuals to perform estate tax freezes, managing the value of their estates and potentially qualifying them for estate tax exemptions.

Deferred sales trusts can help families preserve their wealth by minimizing tax liabilities from asset sales.

DSTs can give individuals and families greater control over their asset management, facilitating reinvestment and diversification while minimizing or managing taxes from transactions.

Who Is a Deferred Sales Trust Best For?

Although traditionally used by the ultra-wealthy, deferred sales trusts can benefit individuals and families from various financial backgrounds. Examples of people who might use a deferred sales trust to manage the tax effects of selling an asset, business, or investment include:

  • Business owners considering selling their company or partnership interest who want to spread out the capital gains taxes from the sale over several years
  • Owners of investment properties — such as apartment buildings, commercial real estate, market investments, or cryptocurrency — who want to sell the property without incurring a significant, upfront tax bill
  • People nearing retirement who want to sell out of assets or investments to diversify their portfolio or shift their investment strategy while not losing some of the growth in their investments to taxes
  • Individuals who inherit valuable properties and want to manage the tax consequences of selling those assets

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

A deferred sales trust can spread out or defer capital gains tax and potentially generate income from reinvested sale proceeds through a multi-step process:

  1. Transfer of Property or Business to the Trust – First, the property or business owner must transfer their asset to the trust; the owner cannot retain any interest in the asset before its sale to the ultimate buyer. In exchange, the owner receives an installment payment contract that details their right to receive payments of income and principal from the sale proceeds.
  2. Trust Sells the Asset – The trust conducts the asset sale to the buyer and receives the sale proceeds.
  3. Sale Proceeds Held in Trust – The trust must hold all title and interest in the sale proceeds; the former asset owner may not have any remaining interest in them.
  4. Proceeds Invested – The trustee may invest the sale proceeds to generate income, which the trust can pay to the former 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 installment payment contract will outline when the trust must pay principal and income from the sale proceeds and how much the former owner will receive per payment. In some cases, the installment payment agreement may only pay interest, allowing the former property owner to indefinitely defer capital gains taxes from the asset sale. 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 trust must meet the following requirements to confer the benefits of a DST:

A property owner must select a third party to serve as the trustee; the owner may not control or influence the trustee or the trust.

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

The property owner must create the trust before agreeing to sell their property to the buyer.

The trust must sell the asset or business for the same price that the original owner sold it to the trust; the owner receives payment of income and principal from the sale proceeds per the terms of the installment payment contract.

What Assets Are Suitable and Eligible for a DST?

Today, many people use DSTs to manage tax liabilities from selling various types of assets that can increase in value and whose sale triggers capital gains taxes. Examples of assets suitable for a DST include:

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

What Our Minnesota Deferred Sales Trust Attorneys Can Do

At 453 Deferred Sales Trust Powered by Pennington Law, our Minnesota deferred sales trust lawyers help individuals and families manage the tax implications of asset or business sales by:

  • Sitting down with clients to understand their financial situation, the details of their proposed asset sale, and their needs and goals
  • Reviewing clients’ circumstances to evaluate the suitability of a deferred sales trust for their financial objectives
  • Ensuring trusts meet legal requirements to provide clients with the tax benefits of deferring capital gains taxes
  • Structuring deferred sales trust to serve clients’ specific goals, whether those involve managing capital gains taxes by spreading tax liability over an extended period or deferring taxes indefinitely by only receiving payment of the income generated by reinvesting sale proceeds

Contact a Minnesota Deferred Sales Trust Attorney Today

Don’t sell a major asset that’s gained in value without talking to us about how a DST can help you manage or mitigate your tax consequences. Contact 453 Deferred Sales Trust Powered by Pennington Law today for an initial consultation. A Minnesota deferred sales trust attorney will discuss DST strategies and show how our firm can help you keep more of the wealth you’ve built.