623-229-0463 New Jersey Deferred Sales Trust Attorney
For years, the ultra-wealthy have used various legal strategies to manage the tax implications of high-value asset sales and ownership transfers, including setting up deferred sales trusts (DSTs). Now, you, too, can use this option to protect your hard-earned wealth. An experienced New Jersey deferred sales trust lawyer from our firm can help you discover “The Tax Tool You Didn’t Know You Had.”
At 453 Deferred Sales Trust Powered by Pennington Law, we have the experience and professionalism needed to set up a DST tailored to your needs. This includes assessing whether one would be right for your sale process and helping you manage the tax consequences of an asset or business sale. Contact us today for a free, no-obligation consultation to learn more.
Why Choose 453 Deferred Sales Trust Powered by Pennington Law?
Given the complexity of the tax laws governing deferred sales trusts, you can best protect your rights and interests by working with a knowledgeable deferred sales trust attorney to ensure you receive the benefits of a trust. Choose 453 Deferred Sales Trust Powered by Pennington Law to guide you through the trust formation and management process because:
- Our firm provides an all-in-one service that handles numerous legal and financial matters, such as tax, trusts, and financial investments. Unlike other firms that must turn to outside professionals for specialized knowledge, we’ve built an IRS-compliant comprehensive program under one roof to help you with all your needs.
- We have extensive knowledge and experience in numerous legal arenas, including estate planning, tax strategies, insurance, and asset protection. This comprehensive know-how means you receive informed, strategic advice tailored to your unique situation.
- Lead attorney Andre Pennington has achieved national recognition for his experience in tax, trust, and investment law, and he has been featured in publications such as The New York Times, The Wall Street Journal, Forbes, and USA Today. He has also earned top listings from peer-review services such as Super Lawyers, Lawyers of Distinction, and Best Attorneys in America, with clients and fellow attorneys praising him for his superb legal service. In addition, our practice has been recognized as the Best Deferred Sales Trust Law Firm in the U.S. of 2024 by Best of the Best.
- Our team excels at securing the full potential value of our clients’ investments. We leverage our experience to ensure that you receive the maximum return on your investments at the final step of the process.
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 strategy that uses a special type of trust to manage or mitigate capital gains taxes imposed following the sale of an asset that has appreciated during a party’s ownership.
With a deferred sales trust, an owner of an asset they intend to sell, such as a business or parcel of real estate, transfers the asset to a trust in exchange for an installment payment contract, which outlines how the trust will pay the asset owner from the proceeds of a sale of the asset. After receiving ownership of the asset, the trust sells it to a bona fide buyer for the same it agreed to pay the former owner.
The former owner pays no capital gains tax on the sale proceeds unless the trust distributes them to the owner. Thus, an owner can defer capital gains tax indefinitely by foregoing payment of the sale proceeds; instead, the owner can receive distributions of income generated from reinvesting the sale proceeds into other assets. 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.
Some of the top financial benefits of DSTs include:
Asset owners can use deferred sales trusts to reinvest the value from a sold asset or business, allowing owners to continue growing their wealth without incurring capital gains taxes to reinvest or diversify.
The key tax benefits of DSTs include deferring capital gains taxes, with taxes coming due over a more advantageous schedule or deferred entirely if asset owners choose to receive only the income generated from reinvesting the proceeds.
Deferred sales trusts provide 1031 exchange alternatives and have several advantages over Section 1031. Some of the benefits of a deferred sales trust vs. 1031 exchange include greater flexibility in the types of assets owners can reinvest into and the timing of when reinvestments must occur to obtain tax benefits.
Asset owners can use deferred sales trusts to perform an estate tax freeze, which can reduce the value of one’s estate to qualify for estate tax exemptions.
DSTs allow families to preserve more of the value of their assets and investments by deferring capital gains taxes to more advantageous tax years or indefinitely.
Deferred sales trusts give asset or business owners greater flexibility and control over their financial planning.
Who Is a Deferred Sales Trust Best For?
Individuals and families in various situations may benefit from creating a deferred sales trust to manage the sale of an appreciated asset or business. Examples of parties who might use a DST for estate, financial, and tax planning purposes include:
- Individuals and families with investment/income properties — like apartment buildings or commercial real estate, market investments, and cryptocurrency — who want to sell the property after it has appreciated without triggering a significant upfront tax bill for capital gains tax.
- Business owners considering retiring or selling their company or partnership interest who want to manage the tax liability from such a sale over a more extended period.
- People approaching retirement who want to sell high-value assets to diversify or change their investment strategy to meet retirement needs but don’t want to lose part of their wealth to capital gains taxes by exiting their current assets or investments.
- Individuals who inherit high-value property who want to sell it without substantial tax liability.
How Does a Deferred Sales Trust Work and How Is Income Generated?
Deferred sales trusts follow a multi-step process to provide an asset owner with tax benefits and financial flexibility to reinvest the proceeds from an asset sale. The process of using and managing a DST involves:
- Transfer of Property or Business to the Trust – An asset/business owner must first transfer ownership and control of the asset to the DST; the owner may not retain any beneficial interest in the asset or the proceeds from its sale.
- The Trust Sells the Asset – The trustee of the deferred sales trust must complete the process of selling the asset to its ultimate buyer, receiving the sale proceeds directly from the buyer or through a third party, such as an escrow agent. The former asset owner cannot have any interest in the sale or the proceeds.
- Sale Proceeds Held in Trust – The DST will hold the sale proceeds in trust, distributing principal or income from the proceeds per the terms of the installment payment contract between the former asset owner and the deferred sales trust.
- Proceeds Invested – In most cases, a trustee of a deferred sales trust will invest any sale proceeds not distributed to the former asset owner, potentially paying income generated from those investments if 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.
- Installment Payments to the Investor – As established by the installment payment contract, the trust will distribute the sale proceeds to the former asset/business owner; any portion of proceeds distributed triggers capital gains tax liability for the owner. Alternatively, the trust may only distribute income generated from investing the sale proceeds, which can defer capital gains tax indefinitely. 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 must meet specific legal requirements to allow an asset owner to defer capital gains tax on an asset sale. The requirements for deferred sales trust include:
A DST must have a bona-fide third-party trustee, which means the asset owner has no control over or relationship of influence with the trustee.
The trust must receive the sale proceeds directly from the buyer or a third-party deal intermediary, such as an escrow agent; the asset owner cannot have any beneficial interest in the sale proceeds.
An asset owner must form the trust before entering a contract for sale with the ultimate buyer.
The trust must pay the asset owner due compensation in the form of an installment payment contract governing the owner’s right to receive compensation from the sale proceeds; the trust must also sell the asset for the price acquired from the original owner.
What Assets Are Suitable and Eligible for a DST?
In recent years, individuals and families have used DSTs to manage or mitigate capital gains taxes on property or asset sales. Examples of assets that people might place into a DST include:
- Business sale
- Business ownership interests
- Real estate
- Securities
- Cryptocurrency
- Stocks, bonds, and other investments
- High-value collectibles
What Our New Jersey Deferred Sales Trust Attorneys Can Do
At 453 Deferred Sales Trust Powered by Pennington Law, our deferred sales trust lawyers help individuals and families manage taxes on the capital gains from an asset sale. Turn to us for guidance and service that includes:
- Reviewing your financial circumstances and the details of your proposed asset/business sale to determine your options for mitigating taxes and maximizing your financial planning opportunities:
- Discussing your needs and concerns to evaluate the suitability of a deferred sales trust for meeting your financial goals
- Correctly structuring a deferred sales trust to ensure you avoid losing the critical tax benefits of the trust and potentially facing costly penalties, fees, and interests
- Ensuring that the terms of your deferred sales trust meet your specific needs and goals, whether those involve spreading the tax burden of an asset sale over years or deferring taxes indefinitely while providing you with a reliable income stream from your investment
Contact a New Jersey Deferred Sales Trust Attorney Today
If you’re thinking of selling a high-value asset or business, a deferred sales trust can help you manage the tax implications of the sale. There are potential DST strategies to retain more of the wealth you’ve worked so hard to create, and our professionals are here to help you take advantage of them.
Contact 453 Deferred Sales Trust Powered by Pennington Law today for a confidential consultation with a reputable New Jersey deferred sales trust attorney.