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How to Use DSTs for Estate Planning

1031 Exchange| Delaware Statutory Trust (DST) Properties
December 05, 2025•2 min read

There are few financial tasks more important than estate planning for those with significant assets. It is sensible to not only identify the heirs of each asset, but also to ease future tax or administrative burdens whenever possible. With a proper estate plan, heirs may continue to benefit from an investment. It is important to engage tax and legal professionals to obtain estate planning advice.

By investing in a Delaware statutory trust, or DST, heirs may receive any distributions paid from the investments. Upon the sale of the property owned by the DST, each heir can choose what to do with their inherited portion. It is possible that one heir continues to exchange the investment, while another can sell and receive cash proceeds.

Lastly, should a DST investor pass away, under the current tax laws the heirs would get a “step-up” in tax basis bringing the investment up to fair market value, thereby potentially deferring capital gains taxes on the original and subsequent properties.

The value of a step-up in basis option as compared to carryover basis, is capital gains tax savings!

Timing of when a beneficiary inherits property is critical. Property transferred before death receives a “carryover basis” which means the original cost basis is carried over to the heir(s). This requires the heir(s) to pay capital gains taxes on appreciation in the property’s value that occurred during the donor’s lifetime if they sell the property.

The cost basis of property transferred at death receives a “step-up” in basis to its fair market value. The asset receives a step-up in basis so that the beneficiary's capital gains tax excludes the appreciation on the property’s value. For the heir receiving the asset, this can be a substantial tax perk and a form of tax simplification because tracking cost basis of long-term assets can be difficult and expensive.

Illustrative Estate Planning Example

Dad has saved well and does not need to liquidate any real estate assets for his retirement plans. He plans to pass a property to his two children equally. The graphic below provides an illustrative example of two potential scenarios. Note this is a simplified example intended to solely illustrate impact to basis and capital gains taxes.

Estate Planning Example Diagram

The illustration above does not constitute tax or legal advice for any investor. Investors should consult competent tax and/or legal counsel with respect to their specific situation. Nothing herein may be construed as a method or means to avoid estate or property taxes.

Gerald F. "Jerry" Baker, III is the founder of Baker 1031 Investments, a firm built from firsthand experience navigating the intersection of institutional finance and generational family real estate. Jerry has experience working for some of the nation's most reputable real estate private equity firms and hedge funds. Over his career, he has been involved with more than $10 Billion worth of real estate activities.

Jerry Baker

Gerald F. "Jerry" Baker, III is the founder of Baker 1031 Investments, a firm built from firsthand experience navigating the intersection of institutional finance and generational family real estate. Jerry has experience working for some of the nation's most reputable real estate private equity firms and hedge funds. Over his career, he has been involved with more than $10 Billion worth of real estate activities.

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Baker 1031 Investments LLC is a real estate securities investment broker, focused on investment solutions for real estate investors in 1031 exchanges. As a result of the firm's focus on providing custom investment solutions to their clients, Baker 1031 Investments is the chosen investment firm by nearly 30% of sophisticated real estate investors. ¹

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The information herein has been prepared for educational purposes only and does not constitute an offer to purchase or sell securitized real estate investments. Such offers are only made through the Sponsor’s Private Placement Memorandum (PPM) which is solely available to accredited investors and accredited entities. DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney.

There are material risks associated with investing in DST properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potentially adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated.

Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk. Because investor situations and objectives vary this information is not intended to indicate suitability for any particular investor. This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation.

Securities offered through Aurora Securities, Inc. (ASI), member FINRA/SIPC. Baker 1031 Investments (Baker 1031) is independent of ASI. To access Aurora Securities’ Form Customer Relationship Summary (CRS), please click HERE. Baker 1031 Investments, Jerry Baker, and (ASI) do not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstances.

Client examples are hypothetical and for illustration purposes only. Individual results may vary.

This site is published for residents of the United States only. Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all services referenced on this site are available in every state through every advisor listed. For additional information please contact +1 415 579 1660 or email [email protected].

¹ The statement that "Nearly 30% of all experienced real estate investors " is a market share estimate derived from an analysis of third-party market data as of October 2025, representing the proportional relationship between the Baker 1031 Investment investor database and an estimated total market of active real estate investors; this estimate is based on Crexi reporting a 2,000,000 user base, 80% of whom are assumed not to be agents/brokers, and 42% of activity dedicated to investment sales, from which a conservative assumption excludes 15.7% as non-investor service providers (e.g., appraisers, lenders), resulting in an estimated active investor market of 566,664; as the Baker 1031 Investment database comprises over 170,000 individuals or entities, this figure represents 30.00% of the estimated market.

The figures and calculations provided constitute a market share estimate based on unverified third-party data and internal assumptions utilized to define the estimated market; Baker 1031 Investment has not independently verified the accuracy of the underlying data, and the term "experienced real estate investors" is defined exclusively by this methodology and its internal assumptions. This communication is not a guarantee of future results, a testimonial, or a statement of performance for any investment product or service, and its accuracy is subject to the inherent limitations of the underlying data and the validity of the internal exclusion assumptions.

² ³ ⁴ ⁵ The calculated platform averages presented reflect a statistical average of data provided by the specific investment sponsors listed here. The figures used in these averages are collected from self-reported statistics provided directly by the respective firms within their Private Placement Memorandums (PPMs). This information is provided solely for illustrative and educational purposes and is not intended to serve as the basis for any investment decision, nor does it constitute investment advice, a recommendation, or an offer to sell or a solicitation of an offer to buy any security. All data presented is as of November 6, 2025. Due to the nature of self-reporting, the data presented may be incomplete, unverified, or subject to correction, and we make no representation or warranty as to its accuracy, completeness, or timeliness. Past performance is not indicative of future results, and all investments involve risk, including the possible loss of principal. The platform average represents a limited sample, and results from individual sponsors may vary materially. For complete underlying data, data from other investment sponsors, and/or additional detail, please contact us directly. The selection of results shown are a small fraction of the total amount of realized investments and are not guarantees of future results. There are often differences between the performance results and the actual results shown and other investments' outcomes. Delaware Statutory Trust (DST) investments are subject to volatility and loss of investor principal.

⁶ ⁷ ⁸ ⁹ ¹⁰ ¹¹ ¹² Baker 1031 Investments performance data per disclosure points 2 through 5, above. S&P 500 data per St. Louis FRED, all-time average S&P 500 data. “Low Fee” DST data per Origin Investments Growth Fund III, accessed November 6, 2025. Privately Owned Real Estate data per Fundrise, accessed November 6, 2025. Other DST Firms data per Inland historical returns, accessed November 6, 2025. Institutional Real Estate per Invesco Active U.S. Real Estate ETF accessed November 6, 2025. Real Estate Crowdfunding data per Fundrise, accessed November 6, 2025.