Sell Assets. Defer Taxes.
Sell real estate, business, or other highly appreciated assets — defer the capital gains.
Defer for 5, 10, 15+ years. Invest the proceeds in a diversified portfolio. Continue to collect monthly distributions.
Explore potential tax-deferral strategies before selling a highly appreciated asset. This website is a subsidiary of Gold Coast Financial Group.
Among the various tax-aware planning concepts discussed below, the Deferred Sales Trust (“DST”) is one of the more widely discussed strategies that investors explore when seeking potential capital gains tax deferral, portfolio diversification, installment-based income planning, and greater long-term flexibility after the sale of a highly appreciated asset.
Selling appreciated real estate, businesses, or other highly appreciated assets may create substantial capital gains taxes that can significantly reduce the amount available for reinvestment, income planning, or future legacy goals. Many investors explore these strategies after building substantial wealth in a concentrated asset position such as investment real estate, a closely held business, or a highly appreciated investment holding.
A Deferred Sales Trust may provide a potential alternative for certain appreciated asset sales seeking tax deferral, installment-based income planning, and greater long-term flexibility.
What it is
What is a Deferred Sales Trust?
A Deferred Sales Trust is an installment-sale-based planning strategy designed around IRC Section 453 concepts that may allow certain sellers to defer a portion of capital gains taxes associated with the sale of appreciated assets.
Rather than receiving the full proceeds directly at closing, the structure is designed to create installment payments over time pursuant to a customized trust arrangement.
Depending upon the structure and circumstances, potential benefits may include:
- Potential capital gains tax deferral
- Installment-based income planning
- Diversification opportunities
- Flexible investment management
- Potential alternatives to certain 1031 exchange situations
- Estate and legacy planning coordination
- Greater flexibility after the sale of a concentrated or illiquid asset
Every situation is different, and these strategies are not appropriate for all investors or all asset types.
Who explores it
Common situations where a Deferred Sales Trust may be considered
- Investment real estate sales
- Primary residence sales with gains exceeding the applicable IRC Section 121 exclusion
- Business sales
- Highly appreciated illiquid assets
- Non-public or privately held company interests
- Art, collectibles, and specialty assets
- Owners seeking diversification after a large asset sale
- Failed or difficult 1031 exchange situations
Every transaction is unique, and not all assets or situations qualify for Deferred Sales Trust strategies.
Why people explore this
Why some investors explore Deferred Sales Trust strategies
Many investors discover that after years of building wealth through a business, investment property, or appreciated asset, a large portion of the gain may ultimately be lost to taxes at the time of sale.
In some situations, a Deferred Sales Trust may provide an opportunity to:
- spread recognition of gains over time,
- potentially improve reinvestment flexibility,
- diversify concentrated holdings,
- create installment-based income streams,
- and coordinate long-term planning goals.
These structures are often explored before a sale occurs and require advance planning and coordination with qualified professionals.
Beyond the DST
Other tax-aware planning strategies investors may explore
A Deferred Sales Trust is only one potential planning strategy that some investors evaluate before the sale of a highly appreciated asset. Depending upon the client’s goals, income level, asset type, liquidity needs, charitable objectives, and overall financial situation, additional tax-aware planning concepts may also be considered in coordination with qualified professionals.
Strategies we may assist in coordinating
- Deferred Sales Trust strategies utilizing installment-sale concepts under IRC Section 453
- Oil, natural gas, and energy investments utilizing potential intangible drilling cost (IDC) deductions under IRC Section 263(c)
- Professionally managed 1031 exchange programs under IRC Section 1031
- Opportunity Zone investments through professionally managed Qualified Opportunity Zone programs under IRC Sections 1400Z-1 and 1400Z-2
- Charitable remainder trusts (CRTs) under IRC Section 664 (CRT accounts may provide lifetime income distributions based upon the structure and trust terms)
- Estate and gifting strategies coordinated alongside legal counsel, including Mains Law Office
- Tax-loss harvesting and portfolio transition planning
Strategies some investors pursue independently
- Traditional 1031 exchanges completed directly by the investor
- Short-term rental real estate strategies (typically owned, operated, marketed, and managed directly by the investor)
- Cost segregation and accelerated depreciation strategies (typically coordinated through specialized third-party providers and tax professionals)
- Installment sale structures outside of Deferred Sales Trust arrangements
- Conservation easement strategies and charitable land-use planning concepts under IRC Section 170(h), typically coordinated through specialized third-party legal and tax professionals. Due to increased IRS scrutiny surrounding certain syndicated conservation easement structures, we have generally moved away from these strategies.
No single strategy is appropriate for every investor, and many planning techniques involve tradeoffs, risks, illiquidity, holding requirements, suitability standards, and complex tax considerations.
Clients should consult with their CPA, attorney, and financial professionals before implementing any planning strategy.
After the sale
What happens after the sale?
In many cases, once the asset sale is completed and proceeds are received into the trust structure, the funds may then be invested based upon the client’s:
- risk profile,
- income needs,
- time horizon,
- liquidity preferences,
- and long-term financial objectives.
Depending upon the client’s goals, portfolios may include diversified investment strategies consisting of equities, fixed income, cash management, and in certain situations, alternative investment strategies.
Many clients utilize the structure to transition from a concentrated or illiquid asset position into a more diversified investment portfolio designed around long-term planning objectives.
Installment payments and income distributions may then be structured over time based upon the terms of the trust arrangement and the client’s financial goals.
Every investment strategy involves risk, and there can be no guarantee that any investment or planning objective will be achieved.
How it works
A simple three-step process
Initial consultation with Gold Coast Financial Group and Scott Brooks
We discuss the asset, estimated gain, timing, and overall planning objectives.
Strategy review — a deeper dive with the estate planning team, trustee, and tax attorney
The proposed structure is reviewed in coordination with our specialists and the client’s CPA, tax professional, and/or attorney to determine suitability.
Customized planning
For each client, the investment and distribution strategy is designed and structured around personal growth and income objectives, investment objectives, estate planning considerations, and long-term financial goals.
Tradeoffs
Important considerations
Deferred tax strategies involve tradeoffs and are not suitable for every investor.
If you want to defer taxes, you generally give something up — often immediate liquidity, direct ownership, or unrestricted access to sale proceeds.
These structures can be complex and should only be considered after reviewing all risks, costs, tax implications, investment considerations, and legal issues with qualified professionals.
Nothing is perfect. Every planning strategy involves potential benefits, tradeoffs, risks, and limitations.
About us
About Gold Coast Financial Group
Gold Coast Financial Group works with individuals, families, business owners, and real estate investors seeking long-term investment management and planning solutions.
Our process focuses on:
- investment portfolio design and management,
- tax-aware investment coordination,
- financial, retirement, and income planning,
- risk management,
- and multi-generational wealth planning concepts.
We work alongside clients’ CPAs, attorneys, and other professionals when evaluating complex planning opportunities.
Request a confidential review
Tell us about the asset.
Share a little context and a member of our team will follow up. All inquiries are confidential and no-obligation.
Confidential consultation
Confidential consultation process
Initial consultations and preliminary educational discussions are provided on a confidential, no-obligation basis.
In many cases, clients choose to have multiple phone calls, meetings, or Zoom discussions with their advisors, CPAs, attorneys, and other professionals before determining whether a Deferred Sales Trust or other planning strategy may be appropriate.
Costs, trust expenses, legal fees, trustee compensation, and ongoing investment management fees vary based upon the structure, complexity, and asset size involved.
All fees and expenses are reviewed in detail prior to implementation, and clients are under no obligation to proceed.
In general, these costs are intended to fall within customary ranges for trust, investment management, and tax-planning strategies.
Every situation is unique, and all strategies should be carefully evaluated with qualified professionals before implementation.
Contact
Contact Gold Coast Financial Group
Scott S. Brooks
Chief Investment Officer, Owner
Gold Coast Financial Group
2753 Camino CapistranoBuilding B, 1st FloorSan Clemente, CA 92672- Office
- 949.545.6500
- Text
- 949.989.4636
- sbrooks@gcfginc.com
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Disclosures
Investment advisory services offered through NFSG Corporation, an SEC Registered Investment Advisor. Securities offered through Newbridge Securities Corporation, Member FINRA/SIPC. Gold Coast Financial Group is a separate entity and not affiliated with NFSG Corporation or Newbridge Securities Corporation.
This material is provided for informational and educational purposes only and should not be construed as tax, legal, accounting, or investment advice. Gold Coast Financial Group, NFSG Corporation, and Newbridge Securities Corporation do not provide tax or legal advice. Clients should consult with their CPA, attorney, and other professional advisors before implementing any strategy.
Deferred Sales Trusts and installment-sale-based strategies are complex and involve risks, restrictions, fees, limitations, and suitability considerations. These strategies are not appropriate for all investors or all asset types. There can be no guarantee that any tax-deferral strategy will achieve its intended objectives or produce favorable tax results.
Investing involves risk, including possible loss of principal. Past performance is not indicative of future results. Any references to tax strategies, estate planning concepts, or legal structures are general in nature and subject to change based upon current laws, regulations, and individual circumstances.
This material is neither an offer to sell nor a solicitation of an offer to buy any securities. Any such offer may only be made through the applicable offering documents, including a prospectus or private placement memorandum (PPM), which should be read carefully in its entirety before investing. These documents contain important information regarding investment objectives, risks, charges, expenses, and other relevant factors. Some investments may be speculative, illiquid, and involve higher fees and costs.
Information provided is believed to be from reliable sources but is not guaranteed as to accuracy, completeness, or fitness for a particular use.
This communication may include links to third-party websites. When you access these links, you are leaving our website. We make no representation as to the accuracy or completeness of information provided by third-party sites and assume no liability for their content or use.
This website should not be deemed an offer or solicitation in any state where the investment advisor representative is not properly registered. Specific recommendations can only be made after reviewing a client's individual financial situation, investment objectives, and suitability requirements.
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Accredited Investor Definition: An accredited investor is generally defined as an individual with a net worth exceeding $1 million (excluding primary residence), or income exceeding $200,000 individually (or $300,000 jointly with a spouse) for the past two years with the expectation of the same in the current year.