Question 1

What is a Delaware Statutory Trust (DST)?

Accepted Answer

A Delaware Statutory Trust (DST) is a legal entity that holds institutional real estate and qualifies as like-kind property under IRS Revenue Ruling 2004-86, allowing investors to use it as replacement property in a 1031 exchange to defer capital gains taxes.

Question 2

How does a 1031 exchange work with a DST?

Accepted Answer

When you sell an investment property, the proceeds go to a qualified intermediary. Within 45 days you identify a DST as your replacement property, and within 180 days the intermediary funds your beneficial interest in the trust — deferring all capital gains taxes.

Question 3

Does Madrona Financial offer DST advisory in Seattle?

Accepted Answer

Yes. Madrona Financial is a Seattle-based fee-only fiduciary firm that advises clients on Delaware Statutory Trusts, 1031 exchanges, real estate investing, wealth management, and tax planning — with no commissions and no conflicts of interest.

Question 4

What is the difference between a DST and a REIT?

Accepted Answer

A DST (Delaware Statutory Trust) allows direct fractional ownership of specific institutional real estate and qualifies for 1031 exchange treatment. A REIT (Real Estate Investment Trust) is a publicly traded or private fund that owns a portfolio of properties and does not qualify for 1031 exchange deferral, though DSTs can convert to REITs via a 721 UPREIT exchange.

Question 5

Is Madrona Financial a fee-only fiduciary?

Accepted Answer

Yes. Madrona Financial operates under the fiduciary standard, meaning all advisors and CPAs are legally required to act in your best interest. We are fee-only — we do not earn commissions from product sales.

Question 6

What is the minimum investment for a DST?

Accepted Answer

Most DST offerings have a minimum investment of $25,000 to $100,000, making them accessible for investors looking to place 1031 exchange proceeds or diversify a real estate portfolio without a large lump-sum commitment.

Question 7

Can I use a DST for a 1031 exchange in Washington State?

Accepted Answer

Yes. DSTs are available nationwide and are an ideal 1031 exchange vehicle for Washington State real estate investors. Madrona Financial has helped hundreds of Pacific Northwest investors use DSTs to defer capital gains taxes and generate passive income.

Question 8

What happens after the DST holding period ends?

Accepted Answer

After the typical 5–10 year DST hold period, the property is sold. Investors can roll gains into a new DST via another 1031 exchange, convert to a REIT interest via a 721 UPREIT exchange (eliminating future 1031 requirements), or take proceeds as taxable income.