623-229-0463 New York Deferred Sales Trust Attorney
One of the biggest concerns with selling an asset that has increased in value is losing part of that value to capital gains taxes. However, not many people know that the ultra-wealthy have long used legal structures like deferred sales trusts (DSTs) to manage or mitigate the tax implications of an asset sale. This legal instrument could be “The Tax Tool You Didn’t Know You Had” — and our New York deferred sales trust attorneys can make it part of your financial arsenal.
Contact 453 Deferred Sales Trust Powered by Pennington Law today and discover your options for — and the many tax advantages of — a DST.
Why Choose 453 Deferred Sales Trust Powered by Pennington Law?
Setting up a deferred sales trust requires extensive knowledge and experience with complex tax and trust laws. Choose 453 Deferred Sales Trust Powered by Pennington Law to help you manage the tax implications of an asset sale because:
- Our firm provides an all-in-one service. We handle numerous legal and financial matters for clients, such as trusts, reinvestment, and tax filings. Whereas other firms may turn to outside professionals to help with specific aspects of a client’s case, we’ve created an IRS-compliant program under one roof to service all your legal, tax, and financial needs.
- Our team has extensive experience in numerous complex areas of law, including tax, estate planning, wealth management, insurance, and asset protection.
- Firm principal Andre Pennington has become a national leader in tax law, trusts and estates, and investment services, having earned recognition from leading publications such as The Wall Street Journal, The New York Times, USA Today, and Forbes, as well as top listings in Super Lawyers, Best Lawyers 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 will work tirelessly to protect the full value of your investments and wealth.
What Is a Deferred Sales Trust and What Are Its Benefits?
So, what is a deferred sales trust? Also called an installment sale trust, it allows a party to defer payment of capital gains taxes after selling an asset that has grown in value during the party’s ownership.
With a deferred sales trust, an asset owner transfers their asset to the trust in exchange for an installment payment contract, which details how the trust will distribute the principal or investment income generated from the sale proceeds.
The owner pays no capital gains taxes unless the trust distributes any portion of the sale proceeds to the owner. Thus, a DST allows an asset owner to spread the tax liability from an asset sale over the years or defer capital gains tax indefinitely if the trust retains the sale proceeds. An owner may receive only the income generated by the trust’s reinvestment of the sale proceeds.
Some of the advantages of a deferred sales trust include:
The tax benefits of DSTs allow asset owners to manage or mitigate the tax implications of an asset sale, including spreading out the tax liability over multiple years. This may allow owners to offset taxes with other capital losses or postpone taxes indefinitely if the trust keeps the sale proceeds.
Deferring or mitigating capital gains taxes from asset sales allows individuals and families to preserve their wealth in asset sales. Furthermore, deferred sales trusts can reinvest sale proceeds and diversify investments to grow family wealth further.
DSTs offer 1031 exchange alternatives to asset sellers. The benefits of a deferred sales trust vs. a 1031 exchange include greater flexibility in reinvesting sale proceeds (as DSTs do not have 1031 exchanges’ “like-kind” requirement) and the timing of reinvestment.
A deferred sales trust can accomplish an estate tax freeze, which can reduce estate values to qualify for estate tax exemptions or pass on the appreciation in value of assets to beneficiaries or heirs.
Deferred sales trusts give asset owners substantial flexibility in financial planning, allowing them greater control over their wealth.
Who Is a Deferred Sales Trust Best For?
Deferred sales trusts can benefit people from all financial backgrounds, not just the ultra-wealthy. Examples of individuals who might take advantage of the tax benefits of DSTs include:
- Business owners planning to sell their company or ownership interest who want to manage the tax liabilities from a sale
- Owners of investment properties like multi-family residences, commercial real estate, market investments, and cryptocurrency, who want to avoid large tax bills upon selling their properties
- People who inherit high-value assets like real estate or business interests and want to sell their assets while mitigating taxes on the sale
- Soon-to-be retirees who want to sell investments to diversify their portfolio in preparation for retirement but don’t want to lose value to taxes on asset sales
How Does a Deferred Sales Trust Work and How Is Income Generated?
Selling an asset through a deferred sales trust and managing the sale proceeds involves several steps. A correctly established DST works by:
First, an asset owner must transfer the asset they wish to sell to the trust. The owner may not retain any beneficial interest in the asset.
After taking ownership of the asset, the trust will sell it to the intended buyer.
The trust must receive the asset sale proceeds and hold those proceeds in trust. When the trust pays the asset owner any part of those proceeds, the owner must pay deferred capital gains taxes.
In most cases, a trustee of a deferred sales trust will invest the sale proceeds to generate income. The trustee can use that income to pay trust administration expenses or distribute it to the asset owner. Generally, clients are exposed to investments that mitigate and, most times, eliminate the capital gains tax burden.
The trust must have an installment payment contract with the owner that governs when the trust must pay the sale proceeds to the investor (if at all) or income generated from the 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 valid deferred sales trust must meet specific legal requirements. Otherwise, the trust cannot provide the anticipated tax benefits, and an asset owner may have to pay the entire capital gains tax on the sale, plus potential fines, fees, and interest. The requirements for a deferred sales trust include:
An asset owner must not have any control over the trust or trustee.
The trust must receive the asset sale proceeds from the buyer or third-party intermediary; the asset owner cannot receive any interest in the proceeds.
The asset owner must establish the trust and transfer ownership of the asset before selling it to the ultimate buyer.
The asset owner must receive compensation from the trust in the form of an installment payment contract, and the trust must also receive equal compensation from the buyer when selling the asset.
What Assets Are Suitable and Eligible for a DST?
As more people turn to deferred sales trusts as a powerful tax planning tool, these trusts have facilitated the sale of various kinds of high-value assets, such as:
- 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 New York Deferred Sales Trust Attorneys Can Do
When you can benefit from selling an asset through a deferred sales trust, let the legal team at 453 Deferred Sales Trust Powered by Pennington Law guide you through creating and managing a DST. When you turn to us for help, our attorneys will:
An experienced lawyer will thoroughly review your financial situation, including the proposed asset sale, to determine the suitability of a deferred sales trust for your transaction.
Our team will sit down to understand your financial needs, objectives, and concerns to help you shape the best legal and tax strategy for your asset sale.
Our experienced attorneys will draft your deferred sales trust to meet all legal requirements so you do not lose tax benefits and wind up with a significant bill after your asset sale.
We can structure your deferred sales trust to meet your specific needs and objectives, whether those involve merely spreading out capital gains taxes over time or deferring them indefinitely by only receiving income from reinvested 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 a New York Deferred Sales Trust Attorney Today
Before you sell a valuable asset like an investment property or a business, talk to a New York deferred sales trust lawyer from 453 Deferred Sales Trust Powered by Pennington Law. You’ll discover how DST strategies can help you manage the tax consequences of a sale.
Contact our firm today for a confidential consultation to discuss the financial benefits of DSTs for your situation.