1031 Exchange & DSTs

Delaware Statutory Trusts (DSTs) are coming up more and more in conversations with real estate investors and owners as a way to defer taxes.

They’re not new.

But the structure, fees, and accessibility have evolved over the past couple decades.

For the right investor, a DST can be a very useful tool.

Especially for those who are:

• Tired of active management

• Selling a business and own the underlying real estate

• Looking to get off — or at least take a break from — the 1031 hamster wheel

• Have heirs that don't have an interest in direct ownership or are thinking more intentionally about estate and legacy planning

• Seeking passive income without operational headaches

DSTs allow you to sell your property and complete a 1031 exchange into a fractional interest of institutional-grade real estate, while a professional sponsor handles the day-to-day management and operations.

Most DSTs are designed as longer-term investments, typically with a minimum hold period of around 2 years and a target hold closer to 5–7+ years.

At that point, investors generally have several options:

• 1031 exchange into another DST

• 1031 back into direct real estate

• Potentially UPREIT into a non-traded REIT through a 721 exchange

• Cash out and pay the taxes

• Use a combination of the strategies above

Historically, DSTs were primarily distributed through broker channels with high commissions and limited transparency.

Today, they’re increasingly being accessed through fiduciary advisors and institutional platforms, which has improved the landscape considerably.

They’re not perfect.

Liquidity is limited.

Fees matter.

Manager selection matters a lot.

And they should be evaluated as part of a broader wealth, tax, and estate planning strategy, not simply as a way to defer taxes.

But for the right investor, a DST can be a clean exit from the 1031 treadmill without triggering a significant tax bill.