Investor Rights and Trustees Responsibilities in a Delaware Statutory Trust (DST)

When Investors choose a DST, they purchase pieces of beneficial interest and become beneficiaries of the DST’s operations. As beneficiaries, investors have few rights and responsibilities:

• They have the right to obtain distributions. Determined by the investors’ pro-rata interests in the trust, they receive distributions from the trust’s operations, either in the form of rental income or when the property is sold. DST operations can result in either profit or loss; hence, distributions are not guaranteed.

• Investors have no management responsibilities. DSTs are managed and operated by trustees, excluding beneficiaries from the hassle of day to day property management or the details and timing of the eventual sale of the property.

• Investors do not have a deeded title to the property and are not liable for the property.

• Investors incur tax responsibility. DST is not viewed as a taxable entity; therefore, profits and losses are passed through straight to the beneficiaries.

Now let’s consider the responsibilities of the trustees of a DST:

• A DST is managed and operated by a trustee. The trust holds the deed to the property, limiting the trustee’s liability for the property.

• The trustee is responsible for making decisions for the trust to benefit the beneficiaries, which includes everyday operations and the arrangements and timings for the sale of the trust’s assets.

• The trustee needs to follow IRS Ruling 2004-86, which mentions the clauses which limit the DST’s trustee’s power.

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