623-229-0463 South Carolina Deferred Sales Trust Attorney
Have you thought about selling an asset or business? If so, you’ve probably also thought about having to pay capital gains taxes on its growth in value. What you may not know is that the ultra-wealthy have long relied on various legal tools to manage these sorts of tax implications, including deferred sales trusts.
But what is a deferred sales trust (DST), and how can you benefit from one? For starters, a DST can reduce the taxes owed from the sale of businesses, investment properties, or other valuable assets. While this process may sound complex, we at 453 Deferred Sales Trust Powered by Pennington Law are prepared to guide you every step of the way.
Contact our firm today for a free, no-obligation initial evaluation with a South Carolina deferred sales trust attorney to learn about “The Tax Tool You Didn’t Know You Had.”
Why Choose 453 Deferred Sales Trust Powered by Pennington Law?
Due to the legal complexities of deferred sales trusts, having experienced legal counsel can best protect your rights and interests. Choose 453 Deferred Sales Trust Powered by Pennington Law to help you minimize the tax consequences of selling an appreciated asset or business interest because:
- Our firm offers an all-in-one service. Our team handles numerous aspects of your legal and financial needs, including trusts, trustee duties, investments, and tax filings. Whereas other firms turn to outside professionals to address specific aspects of a client’s matter, we’ve created a comprehensive IRS-compliant program under one roof.
- Our attorneys have extensive experience in complex matters, such as tax law, estate planning, financial advising, wealth management, insurance, and asset protection.
- Firm principal Andre Pennington has achieved national recognition for his superb knowledge of tax, trusts, estate planning, and investment services. He has appeared in leading publications such as The New York Times, The Wall Street Journal, Forbes, and USA Today. Andre has also received top listings in the annual Super Lawyers, Lawyers of Distinction, and Best Attorneys in America Lists. 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 tirelessly help you protect the full value of your investments and wealth, recognizing that you have spent your career building your business or assets.
What Is a Deferred Sales Trust and What Are Its Benefits?
A deferred sales trust, also called an installment sale trust, is a legal instrument that allows a person who wishes to sell an asset or business ownership interest that has grown in value to defer capital gains taxes imposed on the sale.
With a deferred sales trust, an owner can transfer their asset or business interest to the trust, receiving an installment payment contract that governs how the trust will pay the sale proceeds to the owner. After selling the property or business and receiving payment, the trust can reinvest the sale proceeds to generate income and distribute principal and income to the former owner.
The owner then pays capital gains tax on any portion of the principal from the sale proceeds distributed by the trust. However, by keeping the principal from the sale proceeds in the trust, an individual or family can defer capital gains taxes indefinitely.
Examples of benefits provided by deferred sales trust include:
Tax benefits of DSTs include allowing individuals and families to defer capital gains taxes from an asset or business sale, spread tax liabilities over multiple years, or defer taxes indefinitely. 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.
DSTs provide 1031 exchange alternatives, giving property owners another means of mitigating taxes from sales. The benefits of a deferred sales trust vs. 1031 exchange include flexibility with the timing and type of reinvestment of sale proceeds, as DSTs do not have 1031 exchanges’ “like-kind” requirement.
Individuals and families can use DSTs to reinvest sale proceeds into new, diverse investment opportunities, enabling further wealth growth.
The tax deferral benefits of deferred sales trusts enable families to mitigate tax liabilities from asset or business sales and preserve more of their hard-earned wealth.
A deferred sales trust can enable an estate tax freeze to control estate valuations and secure tax exemptions.
Deferred sales trusts offer individuals and families extensive flexibility and control over their financial planning by enabling reinvestment of wealth growth and minimizing the tax implications of financial transactions.
Who Is a Deferred Sales Trust Best For?
Although traditionally used by the wealthy, individuals and families from various financial backgrounds have found significant benefits from using deferred sales trusts to manage the tax implications of asset or business sales. Examples of individuals who could use deferred sales trusts to preserve their investments and wealth include:
- Business owners or partners who plan to sell their ownership interests and want to spread the tax liability from the sale over several years
- Owners of investment properties — such as apartment buildings and commercial real estate, as well as market investments and cryptocurrency — who want to sell their properties without incurring a significant upfront capital gains tax bill
- Individuals nearing retirement who want to sell assets or investments to change investment strategy or diversify their portfolios without losing some of the wealth they’ve built to capital gains taxes
- People who inherit assets they want to sell while managing the potential tax implications of a sale
How Does a Deferred Sales Trust Work and How Is Income Generated?
A deferred sales trust allows an asset or business owner to defer payment of capital gains taxes imposed on the sale of their property or business interest and generate income by reinvesting the proceeds from the sale. The process of using a deferred sales trust involves several steps, including:
- Transfer of Property or Business to the Trust – First, an asset or business owner must transfer the property or business interest they intend to sell to the trust.
- Trust Sells the Asset – After receiving the asset from the owner, the trustee will sell it to the ultimate buyer.
- Sale Proceeds Held in Trust – The trust must receive and hold the sale proceeds, distributing principal and income from the sale proceeds as required by the installment payment contract.
- Proceeds Invested – A trustee of a deferred sales trust can invest the sale proceeds to generate income, which the trust may pay to the former asset owner per the terms of 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 – The trust compensates the former owner according to the terms of the installment payment contract, which outlines when the trust must make payments to the former owner and how much the owner receives in each payment (including principal or income). 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 several legal requirements for an asset or business owner to enjoy the ability to defer capital gains tax from selling an asset or business interest. Failure to meet all these requirements may result in an asset or business owner facing significant upfront capital gains taxes plus penalties, fees, and interest on those taxes. Requirements for a deferred sales trust include:
An asset owner must select a third party as the trustee; the owner must not have any control or influence over the trustee.
The sale proceeds from the asset sale must go directly from the asset buyer (or a third-party intermediary) to the trust; the former asset owner cannot receive any portion of or interest in the sale proceeds.
An asset owner must create their deferred sales trust before contracting to sell their property or business interest to a third party.
The trust must sell the asset to the ultimate buyer for the same price the original owner sold it to the trust.
What Assets Are Suitable and Eligible for a DST?
Today, individuals and families use deferred sales trusts to manage the tax implications of selling various types of assets that can grow in value during ownership. Examples of assets you might sell through a DST include:
- Business sale
- Business ownership interests
- Real estate
- Securities
- Cryptocurrency
- Stocks, bonds, and other investments
- High-value collectibles
What Our South Carolina Deferred Sales Trust Attorneys Can Do
When you turn to 453 Deferred Sales Trust Powered by Pennington Law to guide you through the process of considering and establishing a DST to help you manage the taxes from an asset or business sale, you can expect our team to:
- Thoroughly review your financial circumstances and the proposed asset/business sale to understand your situation
- Discuss your financial planning goals and needs to evaluate whether a deferred sales trust can best serve your interests
- Correctly set up your DST to ensure you do not lose its tax benefits and end up paying considerable penalties, fees, and interest
- Tailor the deferred sales trust to your specific goals, whether you want to spread out the tax liability from an asset/business sale over multiple years or defer capital gains taxes indefinitely by only receiving income from the reinvested sale proceeds
Contact a South Carolina Deferred Sales Trust Attorney Today
Before selling an asset or business that may trigger capital gains taxes, talk to 453 Deferred Sales Trust Powered by Pennington Law. We can advise you on DST strategies that may allow you to mitigate and manage the tax implications of selling appreciated property. Contact our firm today for an initial consultation with a South Carolina deferred sales trust lawyer. You’ll discover the financial benefits of DSTs and their suitability for your financial planning goals.