What Are the Benefits of a Deferred Sales Trust?
A Deferred Sales Trust offers significant advantages over traditional capital gains strategies.
Short answer: A Deferred Sales Trust lets you defer up to 100% of capital gains taxes, diversify investments freely, protect assets from creditors, create flexible income streams, and gain estate planning advantages — all without the tight deadlines and restrictions of a 1031 Exchange.
When appreciated assets are sold, tax on the gain is deferred until the seller receives payments of the principal. Opting to receive future payments in lieu of an immediate lump sum delays the recognition of capital gains, thereby enabling the taxpayer to earn interest on the pretax proceeds for an extended period. Negotiating the amount and frequency of principal distributions can also enable the seller to benefit from lower marginal tax rates for the years in which the gains are recognized. Here is a close look at some of the primary benefits of using the Deferred Sales Trust.
Liquidity and Diversification
Can potentially convert an illiquid asset, like a business or commercial real estate, into a diversified portfolio of liquid investments that secure the seller's promissory note. This can help reduce risk and volatility by preventing overexposure to a single asset class.
Enhanced Retirement Income
Can provide a stream of income for retirement based on the pre-tax proceeds from the sale instead of the after-tax proceeds, which are likely to be substantially less.
Maintains Family Wealth
Helps to maintain wealth within the family by avoiding a massive drain of equity at the time of the sale, potentially providing significant estate planning benefits, and providing estate liquidity so that significant assets do not have to be liquidated under less-than-ideal circumstances.
Estate Tax Benefits
The DST can be combined with additional planning to accomplish an estate freeze for estate tax purposes, and to potentially remove the proceeds of the sale from the seller's taxable estate, potentially beyond the amounts exempted by the unified credit.
A 1031 Exchange Alternative
Unlike a 1031 Exchange, the proceeds from the sale do not have to be invested in "like-kind" property in a very short timeframe to achieve tax deferral.
Can Sever Partnership Interests
When a partnership or other ownership group sells an appreciated asset, they do not need to remain together to achieve tax deferral. Each individual owner can have their own Deferred Sales Trust, managed to their own risk tolerance and preferences.
Asset Protection
Subject to State specific laws, and in conjunction with additional planning, the taxpayer can secure asset protection by utilizing the DST.
Probate Avoidance
With additional planning, the DST can help avoid the delays and expense of probate.
What Our Clients Say
Working with Quinn and the ECGS team has been a very positive experience. The process has been smooth, communication has been excellent, and they've always been available whenever questions came up. I've appreciated their knowledge, professionalism, and responsiveness throughout everything. Every professional he referred me to was also very helpful and made my financial life easier.
So far, I've been very pleased with how things have gone, both from a service standpoint and with the performance of the trust. It's been great working with the team and I appreciate all of their hard work and support.
Sean Fericks — ECGS Client
November 2025
This testimonial was given by a current client of ECGS. The client was not compensated for this testimonial. ECGS is not aware of any material conflicts of interest.