What Is a Deferred Sales Trust?
A Deferred Sales Trust is a strategy that allows you to defer capital gains taxes when selling a highly appreciated asset.
Short answer: A Deferred Sales Trust (DST) can be described as a "seller carry-back" financing structure. The seller transfers ownership of the asset to a dedicated trust, which then sells it to the buyer. The trust and seller agree to an installment sales contract, deferring capital gains taxes until payments are received. This gives you the opportunity to earn returns on the full pre-tax sale proceeds — money that would have otherwise gone to taxes in the year of sale.
How Does a Deferred Sales Trust Work?
The Deferred Sales Trust could save you thousands of dollars, and gives you the opportunity to earn interest on the money you would have paid to Uncle Sam in the year of the sale. Additionally, even in a depressed real estate market, you can make money (an interest payment) on the full value of the sale (the sales price) and not the net after tax dollars. The Deferred Sales Trust can also be more simply described as a "seller carry-back" financing structure.
The process starts with initial due diligence. If the transaction is viable, the trust and property owner will negotiate to reach terms with regard to the asset(s). Then, the property owner would transfer ownership of the property to a dedicated trust. The trust then sells the property, stock or other capital asset to the buyer. Next, the trust and the seller agree to a payment contract called an "installment sales contract." The contract promises to make installment payments to the seller and those payments can even be structured to continue to future generations with additional estate planning. There are generally minimal taxes to the trust at the time of the sale since the trust often acquires the property from the client for a price that may not be materially different from the sales amount.
Should you choose, you can defer the start date of the principal payments. You may have other income and may not need the payments right away. The tax code does not require payment of the capital gains tax until the seller starts receiving installment payments. The capital gains tax that will be recognized and paid to the IRS and the State is only that portion of the overall capital gains due from the taxpayer's sale to the trust, based upon the proportion of principal repayment established in the terms of the installment agreement.
The Deferred Sales Trust can generate substantially more money over the long run than a direct and taxed sale. It is also superior to a direct installment sale as the concerns of a defaulting buyer are eliminated.
Why Is a Deferred Sales Trust Important?
How Do You Create a Deferred Sales Trust?
Initial Consultation
Request a call with one of our DST consultants. We'll help you understand the Deferred Sales Trust and give you an overview. Our consultant will ask you about the details of the asset you are selling for our records. This information will be used to evaluate your case.
Case Review
Experienced Tax Attorneys and case managers will review your case to determine if the DST is a good fit for your transaction.
Conference Call
An introductory conference call with you, the tax attorney assigned to your case, and the trustee is set up to discuss how you can benefit from using a DST for your sale. During this call, the Deferred Sales Trust structure will be explained to you and any questions will be answered. Follow-up calls can be scheduled, and your own tax and legal advisors are welcome to join.
Engagement Agreement
A conditional engagement agreement is provided to you by the DST attorney for your review. There is no upfront cost or obligation. Once signed, the attorney will establish the trust and engage in preliminary planning. No fees from the DST attorney or ECGS will be paid unless your asset closes with you choosing to utilize the DST.
Implementation
The DST attorney prepares the documentation and implements the Deferred Sales Trust at the close of sale, either through escrow or attorney. The pre-tax proceeds from the sale are delivered to the Trust, the funds are invested in a manner consistent with your risk tolerance, and payments are made to you pursuant to the promissory note.
What a Deferred Sales Trust Client Says
I was dealing with a situation that not a lot of people fully understood, especially with the mortgage over basis issues tied to my properties. Before speaking with ECGS, no one had really taken the time to clearly explain what I was facing or walk me through the options in a way that made sense.
The ECGS team helped educate me on the situation, put together a strategy using the Deferred Sales Trust, and guided me through multiple property sales along the way. The process was handled professionally, communication was always great, and I always felt like they genuinely cared about helping me make the right decisions.
I've been very happy with how everything has turned out so far, and I'm currently in the process of selling another property and using the trust again.
Floyd Luman — ECGS Client
September 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.
Frequently Asked Questions
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