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DEFERRED SALES DEFERRED SALES TRUST™TRUST™Brought to you by Parse Financial Wealth ManagementBrought to you by Parse Financial Wealth Management
Deferred Sales Trust™
Brought to you byParse Financial Wealth Management
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.
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.
Deferred Sales Trust™Tax Efficient Exit Strategy
Meet John & Patty…
Normal Transaction
Real EstateReal Estate
Sell Property
Sell Property
John & PattyAge: 54 and 51John & Patty
Age: 54 and 51Net Sale Proceeds $5,600,000
Net Sale Proceeds $5,600,000
Sale Price $8,000,000
Mortgage Payoff
$2,400,000
Sale Price $8,000,000
Mortgage Payoff
$2,400,000
Taxable Gain
$2,600,000
Taxable Gain
$2,600,000
Normal Taxation
$4,968,200After tax proceeds
$4,968,200After tax proceeds
Taxes: $631,800
Sell PropertySell Property
Federal and State* taxes: 24.3%*California
Depreciation lowers basis which increases Gain
Taxable Gain: $2,600,000
Depreciation: $400,000
John & PattyAge: 54 and 51John & Patty
Age: 54 and 51
Real EstateReal Estate
Sale Price $8,000,000
Net Sale Proceeds $5,600,000
Net Sale Proceeds $5,600,000
Compare Normal vs. DST
Sell PropertySell Property
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.
Real EstateReal Estate John & PattyJohn & Patty
Normal Transaction: $4,968,200 grows to $ 1,058,384
With the DST: $5,600,000 grows to $ 8,698,137
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
Both assume 7% growth and $372,159 per year for 37 years
Difference is the compounding of $631,800 for 37 years
Deferred Sale Trust
They choose their trustee who follows their instructions
(Can be a family member other than children unless
they are co-TT’s)
They choose their trustee who follows their instructions
(Can be a family member other than children unless
they are co-TT’s)
Step #1 We have EPT’s Legal
Network attorney set up John and Patty’s
Deferred Sale Trust
Step #1 We have EPT’s Legal
Network attorney set up John and Patty’s
Deferred Sale Trust
Step #2John and Patty transfer
asset(s) to their Deferred Sale Trust before
escrow closes
Complete asset retention in a tax deferred transaction
Complete asset retention in a tax deferred transaction
Real EstateReal Estate
Sale Price $8,000,000Sale Price $8,000,000
They choose their trustee who follows their instructions
(Can be a family member other
than children)
They choose their trustee who follows their instructions
(Can be a family member other
than children)
Deferred Sale Trust
Net Sale Proceeds$5,600,000
(Depreciation increases capital gain And is deferred)
Net Sale Proceeds$5,600,000
(Depreciation increases capital gain And is deferred)
Step #3The Deferred Sale Trust sells the real estate and there is no gain on the sale to the trust
Step #3The Deferred Sale Trust sells the real estate and there is no gain on the sale to the trust
Real EstateReal Estate
Sale Price $8,000,000Sale Price $8,000,000
$
Deferred Sale Trust
Step #4Trust pays John and Patty (age:54 and 51) an annual
income of $372,159 for 30 years
Step #4Trust pays John and Patty (age:54 and 51) an annual
income of $372,159 for 30 years
$
Real EstateReal Estate
Sale Price $8,000,000Sale Price $8,000,000
Lifetime income can be increased or reduced depending on their goals and estate planning objectives
Lifetime income can be increased or reduced depending on their goals and estate planning objectives
Deferred Sale Trust
IRS receives 100% of the tax due, but spreads it over the term of the contract. Like an interest free loan from the IRS!
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 #4
Income taxes due on a portion of annual income
Annual Income Recap:Tax Free Basis $ 74,799Capital Gain $ 75,335Ordinary $222,025Total Income $372,159
Annual Income Recap:Tax Free Basis $ 74,799Capital Gain $ 75,335Ordinary $222,025Total Income $372,159
$
$
Step #5
John and Patty pay taxes:capital gains - $18,306
ordinary income(% set by their tax bracket)
Step #5
John and Patty pay taxes:capital gains - $18,306
ordinary income(% set by their tax bracket)
Real EstateReal Estate
Sale Price $8,000,000Sale Price $8,000,000
Deferred Sale Trust
Step #6
John and Patty deceased; total value of Trust
transferred estate tax free to their heirs
Step #6
John and Patty deceased; total value of Trust
transferred estate tax free to their heirs
John & Patty’s Beneficiaries
John & Patty’s Beneficiaries
$ $
Real EstateReal Estate
Sale Price $8,000,000Sale Price $8,000,000
Deferred Sale Trust
Frequently Asked Questions
Can we use a portion of the proceeds to re-invest in real estate at a later time? Yes
If I’m in escrow right now, can I still use a Deferred Sale Trust™? Yes
Can we borrow from the Trust? Yes
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
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.
How Is The Money In The Trust Invested?
Depending your client’s goals and objectives, we work with some of the largest financial institutions in the world to develop strategies for:
Asset Preservation Tax Efficiency Liquidity
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
The Deferred Sale Trust TM
DEFERRED SALES TRUST™Brought to you by Parse Financial Wealth Management
Bobby Kashani, CFP®16520 Bake Pkwy Suite 105Irvine, CA 92618 Office: (949) 872-2775Fax: (949) 872-2676Email: [email protected]
Bobby Kashani, CFP®16520 Bake Pkwy Suite 105Irvine, CA 92618 Office: (949) 872-2775Fax: (949) 872-2676Email: [email protected]
