623-229-0463 Virginia Deferred Sales Trust Attorney
Have you considered selling an asset or business interest, but you’re worrying about the tax consequences of a sale due to the growth in your property’s or interest’s value? For years, the ultra-wealthy have leveraged various legal strategies to manage taxes from asset sales and ownership transfers, including setting up deferred sales trusts to facilitate transactions. You can take advantage of this powerful tax avoidance tool, too — and 453 Deferred Sales Trust Powered by Pennington Law can help.
Contact us today for a free, no-obligation evaluation with a Virginia deferred sales trust attorney. You’ll discover why a DST might be “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 ensuring the suitability and legality of a deferred sales trust, working with experienced counsel can best protect your rights and financial interests. You should choose 453 Deferred Sales Trust Powered by Pennington Law to guide you through the process of selling an asset through a deferred sales trust because:
- Our firm offers an all-in-one service covering many legal and financial needs. We handle matters such as trusts, taxes, and financial reinvestment. Whereas other firms may turn to outside professionals to handle specialized issues in a client’s case, we’ve created an IRS-compliant program under one roof to provide you with comprehensive counsel.
- We have substantial experience in various complex legal issues, including estate planning, tax, asset protection, insurance, and financial planning.
- Firm principal Andre Pennington has earned national recognition for his knowledge of tax, trust, and investment law. He has appeared in national publications like The Wall Street Journal, The New York Times, USA Today, and Forbes. He has also received top peer-review listings from publications such as Super Lawyers, Best Lawyers in America, and Lawyers of Distinction, recognizing the deep respect his clients have built for his work. 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 works tirelessly to help you protect the wealth you’ve spent your career building.
What Is a Deferred Sales Trust and What Are Its Benefits?
So, what is a deferred sales trust (DST)? Also called an installment sale trust, a DST is a legal strategy that allows a party selling an asset to manage or mitigate capital gains taxes on the sale.
An asset or business owner can sell their property via a deferred sales trust; in exchange for transferring an asset to the trust, the owner receives an installment payment contract that establishes the trust’s obligation to pay the owner from the sale proceeds. Because the trust, not the owner, receives the sale proceeds, the owner has no immediate capital gains tax liability. Instead, the owner pays capital gains tax only when the trust distributes sale proceeds to them.
If an owner chooses not to receive the sale proceeds, they can defer capital gains tax indefinitely. The trust may instead reinvest the sale proceeds and pay the income generated to the owner if required by the installment payment contract.
Examples of the financial benefits of DSTs include:
Asset or business owners can use a DST to reinvest sale proceeds, allowing their wealth to grow further.
Tax benefits of DSTs include enabling property/business owners to manage capital gains tax liabilities from an asset sale, spreading tax bills over several years, or deferring taxes entirely by leaving the principal sale proceeds in the trust. 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, offering several benefits over Section 1031. Some differences between a deferred sales trust vs. a 1031 exchange include greater flexibility over the nature and timing of reinvestment of sale proceeds in a deferred sales trust.
A property/business owner can use a DST to create an estate tax freeze, which can help their estate fall under the thresholds to qualify for estate tax exemptions.
Deferring and managing capital gains taxes from selling high-value assets or business interests allows families to preserve more of their hard-earned wealth.
DSTs give individuals and families significant control and flexibility in managing their wealth and undertaking financial and estate planning.
Who Is a Deferred Sales Trust Best For?
A deferred sales trust can benefit any individual considering selling an asset that has gained value during their ownership when a sale would trigger capital gains tax. Examples of parties who might use a DST in conjunction with an asset/business sale include:
- Business owners considering a sale of their company or partnership interest who want to spread the tax liability of a sale over multiple years
- Investment property owners whose properties — such as multi-family residences, commercial real estate, market investments and cryptocurrency — have significantly increased in value and who want to avoid paying a large tax bill soon after selling their property.
- Individuals approaching retirement who want to divest current assets or investments to diversify or change their investment strategy without losing some of the value of their investments to taxes
- People who inherit high-value property and want to sell it while mitigating the tax consequences of a sale
How Does a Deferred Sales Trust Work and How Is Income Generated?
Understanding how deferred sales trusts work can help you determine whether to use one when selling a business interest or high-value asset. The process of establishing and operating a deferred sales trust includes:
- Transfer of Property or Business to the Trust – First, an asset owner must transfer the asset they wish to sell (e.g., real estate or a business ownership interest) to a third-party trust. In exchange, the owner enters an installment payment contract that governs how the trust will repay the owner from the sale proceeds.
- Trust Sells the Asset – The trust handles the asset’s sale to the ultimate buyer and receives the sale proceeds directly from the buyer or a third-party intermediary.
- Sale Proceeds Held in Trust – The trust must receive the sale proceeds and hold them in trust; the former asset owner cannot have any beneficial interests in the sale proceeds to defer capital gains tax.
- Proceeds Invested – In many cases, a deferred sales trust will reinvest the sale proceeds to generate income to distribute to the former asset owner. 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 can pay the sale proceeds to the former owner in installments, with the owner paying capital gains tax on any payment of principal sale proceeds. However, the owner can defer capital gains taxes indefinitely by electing to receive only the income generated from the reinvested sale proceeds, which remain in the trust. 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 that allows an asset or business owner to defer capital gains taxes from the sale of their property must meet several legal requirements, including:
The trust must have a bona fide third-party relationship with the asset owner, meaning the asset owner cannot control or influence the trustee.
The trust must receive and hold the sale proceeds; the asset owner cannot have any beneficial interest in the proceeds.
The asset owner must form the trust before entering into a sale agreement with the ultimate buyer of the asset.
The trust must compensate the asset owner per the terms of the installment payment agreement, which requires the trust to sell the asset for the same value that the owner transferred the asset to the trust.
What Assets Are Suitable and Eligible for a DST?
Today, individuals and families use deferred sales trusts to manage taxes from selling high-value assets. Examples of assets commonly sold through DSTs include:
- Business sale
- Business ownership interests
- Real estate
- Securities
- Cryptocurrency
- Stocks, bonds, and other investments
- High-value collectibles
What Our Virginia Deferred Sales Trust Attorneys Can Do
Let the deferred sales trust lawyers from 453 Deferred Sales Trust Powered by Pennington Law guide you through the process of managing the tax implications of an asset or business sale by:
- Carefully reviewing your current personal and financial situation and evaluating the details of your proposed asset/business sale
- Understanding your needs and concerns regarding preserving your family’s wealth to determine the suitability of using a deferred sales trust to manage taxes from an asset sale
- Ensuring the correct set-up of your DST to ensure you can enjoy the tax benefits of the trust, whether that means spreading tax liability over the years or deferring taxes entirely to enjoy an income stream from reinvested sale proceeds
Contact a Virginia Deferred Sales Trust Attorney Today
Are you looking to sell a valuable asset or your business? Before you do, talk to a Virginia deferred sales trust lawyer about the suitability of a deferred sales trust for managing the tax consequences of a sale. Contact 453 Deferred Sales Trust Powered by Pennington Law today for a confidential consultation. You’ll discover how a DST can help you protect and manage your wealth and the DST strategies we can employ to get you where you’d like to go.