623-229-0463 Deferred Sales Trust for Long-Term Private Retirement Planning
When you’ve spent your career building wealth to enjoy in retirement, it can feel frustrating to pay high capital gains taxes for assets you saved to support you in retirement. What if there were a way to avoid the associated tax burden of these assets and keep more of your hard-earned wealth for yourself? A deferred sales trust (DST) could help you do just that.
At 453 Trust Powered by Pennington Law, we want to help you understand the benefits of a DST for long-term private retirement planning. Our team has been recognized as the Best Deferred Sales Trust Law Firm in the U.S. in 2024. Firm founder Andre Pennington has also received widespread praise and has appeared in publications like The New York Times, Forbes, Inc., The Wall Street Journal, and USA Today. We’re ready to put this experience and reputation to work on your behalf so that you can take charge of your retirement planning.
Don’t wait. Contact our firm today for an initial evaluation to learn more about deferred sales trusts – The Tax Tool You Didn’t Know You Had.
How Does a Deferred Sales Trust Support Tax-Efficient Retirement Planning?
A deferred sales trust can form part of a retirement planning strategy that mitigates the various tax consequences that may come with retirement. People use deferred sales trusts to manage the capital gains tax liabilities that come from selling an appreciated asset. When you sell an asset, such as a parcel of real estate or, business interest, through a deferred sales trust, you do not have to pay capital gains taxes on the sale until the trust distributes the sale proceeds to you. Instead, you can reinvest the full amount of the sale proceeds into new investments that can generate income to provide you with financial support during your retirement. Because you defer taxes, you don’t have to pay taxes on the proceeds from the sale. Instead, you can space the proceeds and the associated taxes out so that you don’t have a substantial tax bill on your hands.
Deferred sales trusts allow you to spread the capital gains tax hit from selling an asset for retirement over multiple years, which can make financial planning for retirement more tax-efficient. Thus, whether you sell an asset and draw down the sale proceeds during retirement or reinvest the proceeds to generate an income stream, a deferred sales trust may help you achieve your retirement financial planning goals.
Why Retirement Planning Needs a Long-Term Wealth Strategy
Your life doesn’t end at retirement, which is why your retirement planning should focus on developing a long-term wealth strategy to ensure that you have the financial resources you will need as you age. Depending on your needs and goals, you may want a wealth strategy that allows you to afford travel or other favorite activities during the first part of retirement while ensuring you have financial resources to afford long-term care as you age. A long-term wealth strategy can leverage tools like the following to ensure that you have the income you need throughout your retirement for any unexpected situations or circumstances:
- Deferred sales trusts
- Other kinds of living trusts
- Retirement accounts like 401(k)s or IRAs, pensions, and annuities
Using a DST to Grow Retirement Income Over Time
You can use a deferred sales trust to build retirement income through the tax regulations that enable you to defer capital gains taxes from the sale of an appreciated asset, specifically under Internal Revenue Code Section 453.
The process begins with establishing a bona fide third-party trust, managed by an independent third-party trustee. No one wishing to sell an asset through a deferred sales trust can have any control or influence over the trustee if they wish to receive the tax benefits of a DST. Rather, the owner transfers their asset to the deferred sales trust in exchange for an installment contract that establishes how the trust will pay principal or income from the installment sales to the owner. The trust then sells the asset to a bona fide purchaser and receives the sale proceeds. The owner cannot have any interest in the sale proceeds beyond their right to receive payments under the installment contract.
When the deferred sales trust sells the asset, the owner does not owe capital gains taxes immediately. Instead, the trust can reinvest the sale proceeds into other assets that can grow in value over time or produce income. The owner pays capital gains taxes when the trust distributes proceeds from the asset sale. Thus, this tax deferral strategy helps grow retirement income by enabling people to reinvest wealth while managing the tax implications of selling prior investments.
Who Can Benefit from Using a DST for Retirement Planning?
Anyone who has built a substantial portion of their wealth through highly appreciated assets may benefit from the potential tax savings a deferred sales trust offers when they plan to use their wealth to fund their retirement. These people could include:
- Small business owners
- Real estate investors
- Property owners
- High net worth individuals
- Individuals with substantial family wealth
- People who have invested their income into capital assets
An experienced deferred sales trust attorney can review your financial objectives and discuss your goals and needs in retirement. That way, they can determine whether you may benefit from incorporating a DST into your private retirement strategy.
Integrating DSTs Into a Private Retirement Strategy
A DST-based retirement strategy will look to reinvest wealth you’ve built during your career through growing a business or investment activity to provide you with a steady income stream that supports you during retirement. Using deferred sales trusts can also form part of your overall estate plan by putting your wealth under the management of an independent trustee who can oversee your assets should you become incapacitated or otherwise unable to manage your financial affairs yourself.
This sophisticated financial tool can work with other retirement assets you’ve accumulated, including tax-advantaged retirement accounts, pensions, and Social Security retirement benefits. It can also complement different aspects of your estate plan, including your will, other living or irrevocable trusts, and beneficiary designations.
Don’t Let Taxes Drain Your Retirement — Consult Our Attorneys Today
You’ve worked hard to build a nest egg to enjoy during retirement. Don’t let taxes reduce your wealth and leave you unable to afford the life you want to live. Contact 453 Trust Powered by Pennington Law today for a confidential consultation with a knowledgeable deferred sales trust income planning attorney to discuss how a DST can form part of your financial strategy for your retirement.