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What is a Delaware Trust?

A Delaware Trust, also known as a Delaware Statutory Trust (DST), is a legal entity created under Delaware law. It allows investors to hold, manage, and invest in real estate properties. DSTs are popular for real estate investments, especially in 1031 exchanges, because they offer a way to defer capital gains taxes.

How to Invest in a Delaware Trust

1. Research: Start by researching various DST offerings. Look for reputable sponsors with a track record of successful projects.

2. Consult a Financial Advisor: It's wise to consult with a financial advisor or tax professional to understand how a DST fits into your investment strategy and tax situation.

3. Review Offering Documents: Carefully review the Private Placement Memorandum (PPM) and other offering documents to understand the terms, risks, and potential returns.

4. Accredited Investor Requirement: Ensure you meet the accredited investor requirements, as most DSTs are available only to accredited investors.

5. Invest: Once you've done your due diligence, you can invest by purchasing beneficial interests in the trust.

Pros of Delaware Trusts

• Tax Deferral: DSTs allow for 1031 exchanges, which can defer capital gains taxes.

• Passive Income: Investors receive a share of the income generated by the property without managing it.

• Diversification: DSTs offer the opportunity to diversify investments across different properties and markets.

• Limited Liability: Investors have limited liability, protecting personal assets.

Cons of Delaware Trusts

• Lack of Control: Investors have no control over property management decisions.

• Illiquidity: DST investments are not easily sold or exchanged, which can tie up capital.

• Market Risk: Like all real estate investments, DSTs are subject to market risks, including property value fluctuations.

• Fees: There may be significant fees associated with setting up and managing the trust.

Investing in a Delaware Trust can be a strategic move for those looking to defer taxes and earn passive income, but it's important to weigh the pros and cons and consult with professionals before proceeding.

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