DSTs and Estate Planning

One neglected aspect of DSTs we want to elaborate on is their efficacy as an estate planning tool.

During our 22 years as one of the nation’s top DST property retailers, we cannot count the times investors have told us they are making the switch to remote management of their income property portfolio for the benefit of their children and heirs.

All income property investors know, managing your own dirt is a time, money, and labor intensive endeavor.  As such, it’s a full time job.  A job your children often don’t want.

As effective a wealth building tool as real estate is, it requires a knowledge base and skill set that can take a lifetime to acquire.  If your children aren’t in the trenches with you learning this, it can be difficult, if not impossible, to communicate later in life.

This is particularly true when the income your properties generate has in no small part been used to assure their education and successful start in life.

It goes without saying that young professionals are often fully subscribed with their own set of responsibilities.  This is particularly true if they are married and starting a family.

In these circumstances, the last thing they want dropped on them is the maintenance and management of rental properties they know little or nothing about.  Their idea of wealth accrual probably has little to do with rehabbing rental units as opposed to the chimera of technology stocks and quick riches.  Did anyone say FTX?

By selling your self-managed income properties and 1031 exchanging them into a geographically and functionally diversified portfolio of DST properties, you almost wholly eliminate this potential problem.

As fully stabilized, cash flowing, remotely managed commercial real estate, your heirs never need wrap their head around the management issues which have caused you so many sleepless nights and stress.

It may also give them pause to think more carefully about your estate and its ultimate disposition.

It is a hard fact of life, or better yet the next, that when someone passes, the heir’s first concern is getting at the money.  This can result in a lifetime’s work being squandered with much ruefulness and heartache to follow.

A real plus of the fractional ownership nature of DST properties is their difficulty to sell.  The enforced ownership that comes in its wake can be a good thing.

It can give your heirs the opportunity to grow accustomed to the potential annuity stream monthly rental distributions represent.  Many will then think long and hard about its termination when the DST is sold.

In this way, illiquidity, which is seen by many as the principal disadvantage of DST can morph into a possible strength, enforcing an investment discipline on your heirs they might not otherwise have.  We hope this helps.


Related Post