Risks Of A Delaware Statutory Trust

A DST offers an investor many benefits not found in other shared-ownership types of real estate investments. However, DSTs do not come without some risk – just like any other investment.

One of the biggest risks to consider is the reliance on a program sponsor to manage the investment. Unlike a Tenancy-In-Common (TIC) where individual investors have a direct say, investors in a DST relinquish the day-to-day decision making authority to the program sponsor. This means that should the program sponsor make unwise decisions or become insolvent, the DST could fail without any meaningful input from the individual investors.

Also, as with any investment, there are tax-related risks associated with using a DST for purposes of a 1031 exchange. While DSTs are often ideal for this purpose, there are no guarantees when it comes to the IRS. There is always a chance that the IRS will not approve the DST structure or a particular 1031 exchange.

While the benefits of a DST tend to outweigh the risks, it is prudent to have a full understanding of both when deciding whether to participate in a DST.

To find out how we can help you find and close on your next 1031 exchange property or to learn more about the exchange process and our qualified intermediary services, please visit our website.