Washington Deferred Sales Trust Attorney

For years, the wealthy have used various legal strategies to manage and mitigate tax consequences of property transfers, including leveraging deferred sales trusts. But what is a deferred sales trust (DST)? It’s something that opens up new possibilities for your financial planning, allows you to defer taxes, and optimizes your asset management. You can think of it as “The Tax Tool You Didn’t Know You Had.”

If you’re considering selling a major asset, contact 453 Deferred Sales Trust Powered by Pennington Law first. Let a Washington deferred sales trust lawyer show you how this powerful tax avoidance tool could be right for you.

Why Choose 453 Deferred Sales Trust Powered by Pennington Law?

When using a deferred sales trust to manage the tax implications of an asset or business sale, having experienced legal counsel can best protect your legal and financial interests. Turn to the legal team at 453 Deferred Sales Trust Powered by Pennington Law to walk you through the process of selling an asset or business through a deferred sales trust to secure critical financial and tax benefits. Our reputable firm is a top-tier practice because:

  • We provide an all-in-one service to clients, handling various matters involving trusts, taxes, or financial investments. Unlike other firms that must rely on outside professionals for technical issues, we’ve developed an IRS-compliant program under a single roof to offer you comprehensive legal counsel and service.
  • Our legal team has developed in-depth knowledge and experience in complex areas of law, such as tax strategies, asset protection, estate planning, insurance, and financial planning.
  • Andre Pennington has become nationally recognized for his leading voice in tax, trust, and investment law, appearing in publications like The New York Times, The Wall Street Journal, Forbes, and USA Today. He has also earned top listings from peer-review organizations such as Super Lawyers, Best Lawyers in America, and Lawyers of Distinction, reflecting the deep respect and gratitude he has received from clients for his legal representation and counsel. 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 will work hard to ensure you protect your family’s wealth through tailored legal solutions.

What Is a Deferred Sales Trust and What Are Its Benefits?

A deferred sales trust, also known as an installment sale trust, is a legal tool that enables individuals and families to manage the tax implications of selling an asset, such as a business or piece of real estate, that has increased in value during ownership.

An asset or business owner can sell their property through a deferred sales trust; when set up correctly, the trust allows the owner to defer capital gains tax liability. In exchange for transferring an asset to the trust to sell, the owner enters an installment payment contract that describes how the trust will pay the owner from the sale proceeds.

An owner pays capital gains tax only when the trust distributes the principal from the sale proceeds. Alternatively, an owner can structure their DST to keep the sale proceeds and only pay income generated by reinvesting the proceeds, which may allow the owner to defer capital gains 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.

Some of the top financial benefits of DSTs include:

Property and business owners can use DSTs to reinvest proceeds after selling an asset that has provided a return on investment, allowing individuals and families to continue growing wealth.

The tax benefits of DSTs include deferring capital gains taxes on asset sales. An asset owner may spread taxes over several years or defer taxes entirely by receiving only the income generated by reinvesting sale proceeds and keeping those proceeds in the trust.

Deferred sales trusts offer 1031 exchange alternatives, as a DST has several advantages. Differences between a deferred sales trust vs. 1031 exchange include more flexibility in the required timing of reinvestment of sale proceeds and the types of assets a party can reinvest.

A person may use a DST to effect an estate tax freeze, which can preserve or reduce estate values to qualify for tax exemptions.

Because deferred sales trusts allow families to manage or mitigate capital gains taxes, they can preserve more of the value of their wealth from taxes.

DSTs allow asset owners to exercise greater control over their finances, including having the option to diversify or reinvest wealth in response to changing needs and goals.

Who Is a Deferred Sales Trust Best For?

A deferred sales trust can benefit an individual who wishes to sell an asset that has increased in value over the years by enabling them to manage the taxes that may arise from a sale. Examples of people who might use a deferred sales trust in connection with an asset sale include:

  • A business owner who plans to sell their company or ownership interest and wants to spread the tax liability from the sale over multiple years.
  • An investment property owner who wishes to sell a parcel that has increased in value during ownership and wants to avoid a sizeable upfront tax bill right after the sale. These include real estate, market investments, and cryptocurrency.
  • People planning for retirement in the next few years who want to diversify their portfolio or shift their investment strategy to better suit their retirement needs without losing some of the wealth they’ve built to taxes when cashing out of assets or investments.
  • Individuals who have inherited high-value property they want to sell while mitigating tax consequences from a transaction.

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

Deferred sales trusts go through a specific process to grant an asset or business owner deferral from immediate capital gains taxes after an asset sale. Deferred sales trusts work by

  1. Transfer of Property or Business to the Trust – First, the asset/business owner must transfer their property or interest to the trust, which handles the asset’s sale to the eventual buyer. In exchange, the owner enters an installment payment contract with the trust to govern how the trust will pay the owner from the sale proceeds.
  2. The Trust Sells the Asset – After taking control of the asset, the trust completes the sale process and receives the proceeds directly from the buyer or an intermediary like an escrow agent. The former asset owner cannot have any beneficial interest in the proceeds.
  3. Sale Proceeds Held in Trust – By holding the sale proceeds in trust, the former owner owes no capital gains tax on the sale until the trust distributes the proceeds.
  4. Proceeds Invested – In many cases, a deferred sales trust will invest the sale proceeds to generate income the trust may pay 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.
  5. Installment Payments to the Investor – The trust will distribute principal or income from the sale proceeds per the terms of the installment payment contract. The former owner pays capital gains tax only on that portion of the principal of the sale proceeds received from the trust; if the trust pays no principal, a DST may defer capital gains taxes 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?

To provide an asset or business owner with tax benefits after a sale, a deferred sales trust must meet specific legal requirements, including:

A deferred sales trust must act as a third party facilitating the sale of an asset or business interests on behalf of an owner; the owner should not own, control, or influence the trust or trustee.

The trust must directly receive ownership and interest in the sale proceeds; if the asset owner holds any interest in the proceeds, they may lose the tax benefits of the DST.

A property owner must establish their deferred sales trust before entering a deal to sell their property.

The trust must compensate the property owner through an installment payment contract outlining how the trust will distribute principal and income from the sale proceeds.

What Assets Are Suitable and Eligible for a DST?

In recent years, people have been utilizing deferred sales trusts to facilitate the sale of various types of assets and investments, including:

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

What Our Washington Deferred Sales Trust Attorneys Can Do

What can you expect when you turn to 453 Deferred Sales Trust Powered by Pennington Law for help with financial and tax planning as part of an asset or business sale? Our legal team is at the ready to help you protect your interests and wealth by:

  • Reviewing your financial situation and the details of your proposed asset/business sale
  • Understanding your needs and concerns to evaluate the suitability of a deferred sales trust for your circumstances
  • Ensuring the correct set-up for your DST to ensure you do not lose the tax benefits of the trust
  • Structuring your trust to serve your financial and tax planning goals, whether those include spreading out tax liabilities from an asset or business sale or deferring taxes indefinitely by keeping sale proceeds in trust and receiving income generated by reinvesting those proceeds

Contact a Washington Deferred Sales Trust Attorney Today

Have you decided to sell an asset, business, or investment that has grown in value over the years? If so, reach out to 453 Deferred Sales Trust Powered by Pennington Law today. A Washington deferred sales trust attorney can help you discover DST strategies to manage the tax consequences of a sale and preserve more of your family’s wealth.

Contact us today for a free, confidential consultation to learn more about DSTs and whether one could be right for you.