The Delaware Statutory Trusts is, as is suggested by the name, a legal entity which is created as a trust under the Delaware state laws. The Delaware Statutory Trusts are established with a particular purpose for the investment in real estate and with a more bias on 1031 exchanges.
The DST allows the individual investors to own an equitable share of the trust itself. With the trust, it turns to hold rights in various real estate interests and with the incomes coming from these real estate interests so held by the DST, the investors will in turn receive their equal share of income from them all in proportion to their shares in the DST.
The DST operates in such a manner as to free the investor of the responsibility of taking decisions relating to the investment as it always has a trustee who is charged to oversee these on their behalf. The other important fact to consider about the DST is the fact that it is a non-taxable entity and as such the incomes and losses eared from the trust is passed to the investors.
Looking at their standing in relation to the 1031 exchanges, you will notice that there is a determination that considers the interests in DST as identical to interests in direct real estate investment. To put it simply, the property held under DST will be qualifying for 1031 exchanges in the event that they will have satisfied the other general requirements under the 1031 exchanges. For this reason we can see the DST option as being quite ideal and super an option for the investor who wishes to settle for the investment in real estate but has some constraints and fears over time and management issues with the property. Following are some of the advantages attracting a number to DST’s.
Among some of the benefits of the DST is the fact that they are getting the investors an opportunity to own a share in a securitized priority.
DST’s are as well a popular alternative for the reason that it will eliminate the need with commonly held properties which will demand for a unanimous approval. In case there is a decision to be taken over the held property, the investors basically have no part to play in this and the responsibility does not lie with them as the party to take the decisions is the assigned signatory trustee.
One more benefit of the DST’s is the element of the limits it gets to cases of liability. Where there is the trust going bankrupt, the liability resting on the investors is limited to their investment in the trust and not any liability past this is legal.