Chapter 1
What is a Delaware Statutory Trust?
What is a Delaware Statutory Trust (DST) and how does it work in a 1031 exchange?
A Delaware Statutory Trust (DST) is a legal structure that allows investors to own fractional interests in institutional-quality real estate as part of a 1031 exchange. Rather than purchasing an entire property directly, an investor acquires a beneficial interest in a trust that holds one or more large, professionally managed properties.
DSTs were specifically designed to qualify as “like-kind” replacement property under Section 1031 of the Internal Revenue Code. When properly structured, an investor can exchange out of an actively managed property and into a DST while maintaining full tax deferral.
How a DST Works in Practice
In a typical DST transaction:
- The DST owns the underlying real estate (such as multifamily communities, industrial properties, self-storage facilities, or net-lease assets).
- Multiple investors hold fractional beneficial interests in the DST.
- A professional sponsor manages all aspects of the property, including leasing, maintenance, financing, and reporting.
- Investors receive monthly or quarterly distributions and are allocated their proportionate share of income, expenses, and depreciation.
Because the DST is treated as the owner of the real estate for tax purposes, investors can treat their interest in the DST as replacement property in a 1031 exchange.
What a DST is Not
It is important to understand what a DST does not provide:
- Direct control over the property or day-to-day decisions
- The ability to make changes to the asset or financing
- Easy liquidity (most DSTs are designed as longer-term holdings)
- Guaranteed income or return of capital
Why DSTs Exist
DSTs were created to give investors access to larger, institutional-grade real estate without requiring them to manage the property themselves. They are particularly relevant for investors who want to step away from active landlord responsibilities while still deferring taxes through a 1031 exchange.
At 1031 DST Solution, presented by Corcapa 1031 Advisors, we help investors understand both the structural benefits and the practical limitations of DSTs so they can determine whether this approach aligns with their overall financial and lifestyle objectives.
Explore Whether DSTs Align With Your Investment Goals
If you would like an educational overview of how DSTs compare to other replacement strategies, schedule a consultation or a brief call today by calling (949) 722-1031.
This content is educational and is not tax or legal advice. Please consult your CPA and attorney.
This content is educational and is not tax or legal advice. Please consult your CPA and attorney.
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