Delaware statutory trust
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A Delaware statutory trust (DST) is a legally recognized business trust formed under Chapter 38 of Title 12 of the State of Delaware Code. A DST permits property or business operations to be managed by one or more trustees on behalf of beneficial owners. Unlike common law business trusts, a DST is recognized as a separate legal entity, with certain protections similar to those of a limited liability company or partnership.
In the context of real estate investing, a Delaware statutory trust is most commonly used by owners of income-producing real property with low tax basis who wish to exit direct property ownership while deferring taxes using Section 1031. It is frequently used as a vehicle to transition from active property management into a passive investment structure, often in connection with like-kind exchanges under U.S. tax law.
Historically, business trusts in the United States drew from English common law. Delaware began recognizing statutory business trusts in 1947, and the modern structure was formalized in 1988 with the adoption of the Delaware Statutory Trust Act (DSTA), codified at 12 Del. C. § 3801 et seq. The Act allows broad flexibility through private trust agreements, which govern the operation and rights of trustees and beneficial owners without requiring disclosure of the agreement to the state.