Can I Use a Deferred Sales Trust Post-Sale?
If you’ve recently sold an asset — real estate or a business — and are just now learning about the Deferred Sales Trust (DST), you might be wondering:
“Is it too late to use a Deferred Sales Trust after I’ve already sold?”
Typically, the DST must be established prior to the close of escrow, because the structure relies on the trust being in place before the sale occurs. However, there’s a unique scenario where you can still take advantage of the DST after a sale has closed — if your transaction was structured as an installment sale.
How It Works: Using a Deferred Sales Trust Post-Sale
If you executed a regular installment sale and are currently receiving payments (via a promissory note), there is an option to assign or sell your existing promissory note to a newly formed Deferred Sales Trust.
In this scenario, you can effectively "step into" the DST structure post-sale and still defer capital gains taxes on the payments you haven't yet received.
This can be an excellent solution if you recently sold your asset and realized — perhaps too late — that your capital gains tax bill is much larger than expected. The DST can provide a second chance for tax deferral and strategic reinvestment.
Key Requirements for Post-Sale DST Setup
There are a couple of important factors to keep in mind if you want to explore this post-sale option:
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Your Installment Sale Must Still Be Active
The promissory note cannot be expired. There must still be time remaining before the final (balloon) payment is due. The DST must be set up before the note fully matures, so timing is critical. -
Transaction Size Matters
For the DST to make financial sense, the deal needs to be large enough to justify the setup and maintenance costs.-
We typically recommend at least $1 million in net proceeds and $1 million in gain.
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In some cases — especially in high-tax states like California, New York, New Jersey, or Illinois — it might be worthwhile for smaller deals (around $800,000–$900,000).
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Ultimately, you'll want to make sure the return on investment is prudent and that the DST provides meaningful tax and reinvestment benefits for your situation.
Why It’s Worth Exploring
If you've already sold and thought you missed your opportunity to use a Deferred Sales Trust, this option could offer a valuable second chance. By assigning your installment note to a DST, you can regain control over timing, reinvestment, and tax deferral — even after the initial sale.