Delaware Statutory Trusts (DSTs) and Farmland Investing

Delaware Statutory Trusts (DSTs) are a tax-efficient real estate investment vehicle that allows multiple investors to pool their capital and own fractional interests in professionally managed real estate without needing to manage the properties themselves. A DST is a legal trust formed under Delaware law in which beneficial owners hold a proportional interest in the trust’s real estate holdings. Under IRS rules, interests in a DST can serve as like-kind replacement property in a Section 1031 exchange, making it possible for investors to defer capital gains taxes when selling appreciated real estate by reinvesting the proceeds into DST interests instead of buying a whole property themselves.

For farmland investors, DSTs offer a way to access institutional-grade agricultural real estate or related assets, often with lower minimum investment requirements and professional farm and asset management handling the day-to-day operations. Because the DST structure is typically passive and commercially managed, individual investors do not need to deal with leasing, tenant issues, or operational decisions — they simply receive their share of income and tax benefits based on their ownership percentage.

While DSTs make it easier to diversify, defer taxes, and invest in larger or more diversified land portfolios than most individuals could alone, they also have drawbacks: investors give up direct control over property decisions, and the investments can be illiquid with limited transparency into operations. Before pursuing a DST — especially as part of a 1031 exchange — it’s important to do due diligence and consult a tax or financial advisor to understand both the benefits and risks in the context of your financial goals.