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A Guide to the Pros and Cons of a Deferred Sales Trust



A Guide to the Pros and Cons of a Deferred Sales Trust

Are you ready to sell the property but want to wait until the right time to do so? Or not in a rush to take a lower offer when a better one comes along?

A deferred sales trust is the right answer to waiting for the right moment to sell your property.

Read on to learn the pros and cons and how it works.

What is a Deferred Sales Trust?

A Deferred Sales Trust (DST) is a legal strategy used for deferring capital gains taxes on the sale of real estate or a business. This trust is a tax-deferral strategy that allows property owners to sell their assets and defer the capital gains taxes until a later date, typically until retirement.

Benefits of a Deferred Sales Trust for Sellers

It is a powerful financial tool that can provide many benefits. The pros of a DST are as follows:

Tax Deferral

This means that instead of paying a large sum of taxes upfront when selling the asset, the taxes can be deferred to a later date, allowing for more flexibility in managing cash flow. This is useful for individuals who are looking to retire or transition out of a high-income bracket. To optimize the benefits, one can visit a website like to tailor a tax deferral strategy that is tailored to their needs and goals.


Unlike traditional sales methods, a deferred trust allows for a customized and flexible payment schedule for the seller. This means that the seller can choose a payment timeline that works best for their financial situation. This flexibility can also be beneficial in terms of tax planning, as the seller can choose when and how much they receive in payments, reducing their tax burden.

Wealth Preservation

With the help of financial professionals, the trust can be structured in a way that maximizes long-term wealth preservation. This is beneficial for individuals who want to ensure their wealth is preserved for future generations or for their own retirement.

Potential Drawbacks of a Deferred Sales Trust

DST may seem like an attractive choice, but there are a few cons to consider.

High Setup and Maintenance Fees

The setup fees can include legal and administrative expenses, as well as fees for the professional trustee. These fees can range from thousands to tens of thousands of dollars. There are also ongoing maintenance fees that must be paid to the professional trustee.

Risk of the Trust Being Challenged by the IRS

This risk arises from the fact that the IRS has strict rules and regulations about tax deferment strategies, and they may view the sales trust as an attempt to avoid or evade taxes. In such cases, the IRS may challenge the trust and disallow the tax benefits promised to the taxpayer.

This results in potential legal battles and extra expenses. It puts a dent in the financial strategy and goals of the taxpayer.

Learning More About Deferred Sales Trust

Deferred sales trust can be a valuable tool for individuals looking to save on taxes and diversify their investments. However, it is important to consider the pros and cons and consult with a professional before making any decisions.

If you are interested in learning more about it, schedule a consultation with a financial advisor today. Don’t miss out on the potential benefits this strategy can offer!

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