A structure of choice to diversify investments and enjoy
the benefits of fractional ownership.

What is a Delaware Statutory Trust?

A Delaware Statutory Trust (DST) is an entity that is used to hold title to investment real estate. A properly structured DST that owns a property will qualify as the like-kind exchange property for a 1031 exchange, according to IRS revenue ruling 2004-86. DSTs are often considered a structure of choice for those looking to diversify their investments and enjoy the benefits of fractional ownership opportunities. DSTs permit this fractional ownership where so multiple investors can share ownership in a single property or a portfolio of properties.

Is a Delaware Statutory Trust Right for You?

DSTs are increasingly popular among individuals who currently own investment property but are tired of the day-to-day headaches involved with managing and maintaining their property. DSTs take decision-making out of the hands of investors and place it into the hands of experienced sponsor-affiliate trustees. In common vernacular, DSTs allow investors to rid themselves of the Terrible T’s – tenants, toilets and trash, and instead empower professional managers to do that work.

A helpful way to determine if a DST 1031 exchange is appropriate for you, is to review the characteristics of many DST investors. Typically, they are:

Property owners who no longer want to actively manage real estate

Property owners who might refrain from selling due to expected capital gains tax

Investors who want diversified ownership in commercial real estate

Investors looking to facilitate estate planning

Investors looking for a replacement property

Benefits of a DST Include:

No Management Responsibilities

The DST is the single owner and agile decision maker on behalf of investors. This alone, can be an attractive benefit for owners tired of dealing with the headaches of property management.

Access to Institutional-Quality Property

Most real estate investors can’t afford to own multi-million-dollar properties. DSTs allow investors to acquire partial ownership in properties that otherwise would be out-of-reach.


Investors can divide their investment among multiple DSTs, which may provide for a more diversified real estate portfolio across geography and property types.

Lower Minimum Investments

DSTs can accommodate much lower minimum investments, whereas 1031 exchange minimums often are $100,000 or more.

Insurance Policy

If for some reason the investor can’t acquire the original property they identified in a 1031 exchange, a secondary DST option allows them to meet the exchange deadlines and defer the capital gains tax.

Estate Planning

All 1031 exchange investments receive a step-up in cost basis, so the investor’s heirs will not inherit capital gain liabilities.

Limited Personal Liability

Loans are nonrecourse to the investor. The DST is the sole borrower.

Risks associated with DSTs


DSTs are typically best suited for income-oriented investors who have a long-term investment perspective. Investor may not be able to access their investment until the DST property or properties are sold.

Economic Risk

The well-being of the domestic and local economy (where the property is located) can have an impact on the value of a DST investment and its ability to provide steady income. Investors may be subject to high vacancy rates and loan defaults.

Regulatory Risk

Regulations can change which could change the way a DST operates, potentially affecting the benefits that were initially provided.

Execution Risk

DSTs are subject to strict regulatory requirements that must be adhered to for the investor to preserve their tax-deferred objectives.

1031 Do’s and Don’ts that can help ensure a successful exchange

Experience has shown us there are certain actions to take (and NOT to take) for investors pursuing a 1031 exchange by using a DST.

DO advanced planning for the exchange. Talk to your accountant, attorney, broker, financial planner, lender and Qualified Intermediary prior to exchanging and possibly investing in a DST.

DO NOT miss your identification and exchange deadlines. Failure to identify within the 45-day identification period or failure to acquire replacement property within the 180-day exchange period will disqualify the entire exchange resulting in the sale of the down leg property being fully taxable.

DO attempt to sell before you purchase. Occasionally exchangers find the ideal replacement property before a buyer is found for the relinquished property. If this situation occurs, a “reverse” exchange (buying before selling) may be necessary.

DO NOT dissolve partnerships or change the manner of holding title during the exchange. A change in the Exchanger’s legal relationship with the property may jeopardize the exchange.

DO keep in mind these three basic rules to qualify for complete tax deferral:

  1. Receive only “like-kind” replacement property.
  2. Use all proceeds from the relinquished property for purchasing the replacement property.
  3. Make sure the debt on the replacement property is equal to or greater than the debt on the relinquished property. (Exception: A reduction in debt can be offset with additional cash; however, a reduction in equity cannot be offset by increasing debt.) DO NOT try doing a 1031 exchange using your attorney or CPA to hold title or funds. IRS regulation requires a Qualified Intermediary to properly complete an exchange. Call us for the name of one that operates in your area.

To learn more about the 1031 exchange process and Delaware Statutory Trusts, start by downloading your complimentary eBook on 1031 exchanges below!

Download our eBook to help Investors avoid the most common 1031 Exchange mistakes!

If you are navigating the complexity of a 1031 Tax Deferred Exchange it can feel overwhelming. As a Sr. Financial Advisor, who has built a stellar reputation in the industry, I have seen it all! My experience lead me to understand how important it is to properly educate an investor to ensure a stress-free exchange, so mistakes are greatly minimized!

Download our eBook to help investors avoid the most common 1031 Exchange mistakes!

CPAs and Attorneys alike, have long counted on the trusted advice and experience of Eric Bicknese, an Investment Advisor Representative and licensed real estate agent, who has made DST property consulting the hallmark of this practice.