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DEFERRED SALES TRUST

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Title: DEFERRED SALES TRUST


1
DEFERRED SALES TRUST
  • Brought to you by Parse Financial Wealth
    Management

2
Deferred Sales Trust
Brought to you by Parse Financial Wealth
Management
3
Deferred Sales Trust Tax Efficient Exit Strategy
Sell more real estate Get clients off the
sidelines Position yourself for success A
Deferred Sales Trust TM DST TM is a strategy
that allows a Client to sell an appreciated
asset, receive the proceeds as liquid cash and
pay capital gains taxes over many years rather
than immediately.  The possible benefits include
reliable income from the trust, flexibility in
how the trust is invested (i.e. bonds, stocks, or
real-estate), protection from lawsuits and
creditors, and with the proper planning, the
assets can be arranged to pass to your
beneficiaries estate and gift tax free.
4
Meet John Patty
5
Normal Transaction
Sell Property
Real Estate
John Patty Age 54 and 51
Net Sale Proceeds 5,600,000
Sale Price 8,000,000 Mortgage Payoff 2,400,000
Taxable Gain 2,600,000
6
Normal Taxation
Real Estate
Sell Property
Net Sale Proceeds 5,600,000
John Patty Age 54 and 51
Sale Price 8,000,000
Federal and State taxes 24.3 California
Depreciation lowers basis which increases
Gain Taxable Gain 2,600,000 Depreciation
400,000
4,968,200 After tax proceeds
Taxes 631,800
7
Compare Normal vs. DST
Sell Property
Real Estate
John Patty
Normal Transaction 4,968,200 grows to
1,058,384 With the DST 5,600,000 grows to
8,698,137
Both assume 7 growth and 372,159 per year for
37 years Difference is the compounding of
631,800 for 37 years
The annual distribution and actuarial
calculations are taken from a DST illustration.
Assumptions 5,600,000 compounds at 7 annual
growth over a 37-year period, net of a 372,159
distribution paid annually. Results shown are
after-tax. Tax liability varies with type of
investment -- typically tax-efficient and
tax-deferred. This scenario assumes earnings
taxed at capital gain rates. Normal Transaction
is using the same assumptions as the above with
the exception of a 631,800 beginning tax
payment. This scenario makes certain assumptions
in order to illustrate the important aspects of
this program. These assumptions may not and are
not intended to be representative of the
situation that all sellers of real estate
property face. The particular circumstances which
prospective sellers face exert an effect on the
outcome of this strategy and, in turn, influence
whether it is suitable for a client to undertake.
There may also be additional considerations not
accounted for in this example that may further
affect whether this plan is appropriate for a
particular property seller. Therefore, prior to
engaging in this transaction, it is necessary
that the prospective participant review their tax
situation with their tax advisor to ascertain if
this type of program is right for them.
8
Deferred Sale Trust
Step 1 We have EPTs Legal Network attorney set
up John and Pattys Deferred Sale Trust
They choose their trustee who follows their
instructions (Can be a family member other than
children unless they are co-TTs)
9
Deferred Sale Trust
Complete asset retention in a tax deferred
transaction
Real Estate
Sale Price 8,000,000
Step 2 John and Patty transfer asset(s) to their
Deferred Sale Trust before escrow closes
They choose their trustee who follows their
instructions (Can be a family member other than
children)
10
Deferred Sale Trust
Real Estate
Sale Price 8,000,000
Step 3 The Deferred Sale Trust sells the real
estate and there is no gain on the sale to the
trust
Net Sale Proceeds 5,600,000 (Depreciation
increases capital gain And is deferred)
11
Deferred Sale Trust
Real Estate
Sale Price 8,000,000
Step 4 Trust pays John and Patty (age54 and 51)
an annual income of 372,159 for 30 years
Lifetime income can be increased or reduced
depending on their goals and estate planning
objectives
12
Deferred Sale Trust
Real Estate
Annual Income Recap Tax Free Basis
74,799 Capital Gain 75,335 Ordinary
222,025 Total Income 372,159
Sale Price 8,000,000

IRS receives 100 of the tax due, but spreads it
over the term of the contract. Like an interest
free loan from the IRS!
Step 5 John and Patty pay taxescapital gains
- 18,306ordinary income( set by their tax
bracket)
Step 4 Income taxes due on a portion of annual
income
13
Deferred Sale Trust
Real Estate

Sale Price 8,000,000
Step 6 John and Patty deceased total value of
Trust transferred estate tax free to their heirs
Deceased
John Pattys Beneficiaries
14
Frequently Asked Questions
Can we use a portion of the proceeds to
re-invest in real estate at a later time?
Yes If Im in escrow right now, can I still use
a Deferred Sale Trust? Yes Can we borrow
from the Trust? Yes
15
Deferred Sale Trust - Advantages
  • Income Tax Savings - When appreciated property
    is sold, the seller defers recognition of
    gain until receipt of payments
  • Estate Tax Savings - Removes transferred
    property and all future appreciation from the
    estate without use of gift or estate tax
    exemptions
  • Maintains Family Wealth - Maintains wealth
    within the family
  • Estate Liquidity - Converts an illiquid asset
    into monthly payments
  • Retirement - Provides a stream of income for
    retirement
  • Probate Avoidance - Avoids probate
  • Asset Protection - A DST may place the
    transferred property beyond the reach of
    potential creditors and litigants if the
    transferor retains no interest in the
    transferred property
  • Security - Asset must be transferred on an
    secured basis

16
Tax Planning Alternatives
  • Taxed Sale pay the taxes
  • 1031 Exchange
  • Defective Grantor Trust
  • CRT (Charitable Remainder Trust)
  • CLT (Charitable Lead Trust)
  • GRAT (Grantor Retained Annuity Trust)
  • ILIT (Irrevocable Life Insurance Trust)
  • It is important that your client discuss their
    unique circumstances with our tax attorneys to
    help them determine the best course of action.
    This service is provided at no cost to you.

17
How Is The Money In The Trust Invested?
  • Depending your clients goals and objectives, we
    work with some of the largest financial
    institutions in the world to develop strategies
    for
  • Asset Preservation
  • Tax Efficiency
  • Liquidity

18
The Deferred Sale Trust TM
Fill out the free tax-savings illustration form
today and find out what the Deferred Sale Trust
can do for your client. www.mydstplan.com/parse
19
DEFERRED SALES TRUST Brought to you by Parse
Financial Wealth Management  
Bobby Kashani, CFP 16520 Bake Pkwy Suite
105 Irvine, CA 92618 Office (949) 872-2775 Fax
(949) 872-2676 Email bkashani_at_parsefinancial.com
support_at_parsefinancial.com
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