Ron Nielsen

What is a Delaware Statutory Trust (DST)?

Published on: May 20, 2025

A Delaware Statutory Trust, or DST, is a legal entity structured to hold title to income-producing real estate. It offers a unique investment vehicle that allows multiple investors to co-own fractional interests in a property, providing several benefits along the way. Notably, DSTs are designed to qualify as "like-kind" properties for the purposes of a 1031 exchange, which allows investors to defer their capital gains taxes when exchanging one investment property for another.

Understanding How DSTs Work

A DST operates under a trust agreement, where a trustee manages the property on behalf of the trust’s investors (beneficial owners). These investors hold fractional interests in the DST, giving them passive ownership rights without the responsibilities of active management. The trust itself holds legal title to the real estate, ranging from commercial properties such as office buildings and shopping centers to multifamily apartments and healthcare facilities.

This structure is governed by Delaware State law, one of the most favorable business-friendly jurisdictions in the U.S., which makes it a preferred option for real estate investors seeking tax advantages and simplified management.

Why Consider a DST for Your 1031 Exchange?

Qualified for Tax Deferral

One of the most notable benefits of a DST is that it qualifies as a like-kind property under IRS Section 1031. By investing in a DST, you can defer capital gains taxes when selling an investment property, thereby preserving more of your equity for reinvestment.

Passive Income Potential

With a DST, you gain exposure to income-producing real estate without the burden of property management. The trustee handles everything from leasing and property maintenance to tenant relations, allowing you to enjoy passive income distributions without taking on operational headaches.

Access to High-Quality Real Estate

DSTs open the door to institutional-grade properties that might otherwise be out of reach. These investments are often in prime markets and managed by experienced sponsors who handle asset operations and strategy. This gives you access to high-quality commercial, industrial, and residential properties that can provide diversified income streams.

Fractional Ownership

A DST allows you to co-own a property with other investors, offering a cost-efficient way to participate in large-scale, income-producing assets. This fractional ownership model enables diversification across multiple properties or asset classes, further spreading your investment risk.

Portfolio Diversification

Investing in a DST lets you diversify your portfolio into different property types, geographic regions, or markets. For example, you could give your portfolio exposure to sectors like multifamily housing, industrial warehouses, or medical office buildings without having to individually acquire and manage these asset types.

Key Advantages of DSTs Beyond Tax Deferral

  1. Predictable Cash Flow: DSTs typically provide regular distributions derived from rental income earned by the property. For investors seeking consistent and dependable passive income, this makes DSTs a prime choice.

  2. Limited Liability Protection: Investors in a DST benefit from limited liability, as personal assets are not at risk. Your potential loss is limited to the amount of your investment in the trust.

  3. Ease of Exit Strategy: When a DST property is sold (designated by the sponsor), proceeds are distributed to investors proportionally. Additionally, you have the option to reinvest those gains into another 1031 exchange for continuous tax deferral or other opportunities.

  4. Estate Planning Advantages: DSTs simplify legacy planning by offering clear fractional ownership stakes that can be transferred to heirs. This structure can support long-term wealth-building strategies by helping seamlessly pass assets to the next generation.

Considerations Before Investing in a DST

While a DST offers compelling advantages, it’s important to understand certain risks and limitations:

  • Illiquidity: DSTs are not as liquid as publicly traded securities, which means you might not readily sell your interests before the trust reaches its conclusion.

  • Loss of Control: Since the trustee manages the property, investors have no role in daily operations or decision-making. For some, this passive approach may feel limiting.

  • Qualified Investors Only: DSTs are generally available to accredited investors, meaning there are income and net worth requirements.

Is a DST Right for You?

If you’re a real estate investor looking to defer taxes, simplify property management, or diversify into institutional-grade assets, the DST structure provides an attractive solution. The ability to qualify for a 1031 exchange makes DSTs particularly valuable for those transitioning between properties while seeking to maximize their investment returns.

At Medalist, we specialize in simplifying the nuances of DST investments and 1031 exchanges for our clients, with a focus on single-tenant, triple-net lease (STNL) properties, known for their security, predictability, and long-term income stability. Our mission is to empower you to achieve your financial and lifestyle goals through strategic real estate solutions.

Start your 1031 Exchange Journey with Medalist


Explore how Medalist can help you secure your next investment property and maximize the benefits of a Delaware Statutory Trust. Contact our team today to learn more about your options.