What this article covers
For real estate investors who are tired of active property management, Delaware Statutory Trusts, 721 exchanges, and 1031 strategies offer a path to passive ownership — without surrendering a large share of your gains to taxes. But these strategies are complex, the DST industry has long been dominated by commissioned salespeople rather than fiduciaries, and the difference between the right structure and the wrong one can cost far more than the tax bill you were trying to avoid. Here’s what you need to know — and what the most common mistakes look like — from a fee-only fiduciary who works exclusively in this space.
If you’ve spent years building wealth through investment real estate, you know what it costs to be a landlord, not just in dollars, but in time, stress, and the 2 a.m. phone calls you’ll never get back. What’s less obvious is what it could cost to stop.
Selling an appreciated investment property can trigger capital gains taxes (federal, state, and depreciation recapture combined) that claim a substantial portion of everything you’ve built. For many long-term real estate investors, that tax liability isn’t a number they’re willing to accept, which is why Delaware Statutory Trusts (DSTs), 721 UPREIT exchanges, and 1031 exchange strategies have grown increasingly popular as tools for transitioning from active property ownership into passive real estate without an immediate and painful tax event.
But these strategies aren’t simple, and the DST industry has historically been driven by commissioned salespeople rather than fiduciaries. The wrong advice (or advice from the wrong kind of advisor) can cost far more than the tax bill you were trying to avoid.
That’s why finding a specialist who works exclusively with real estate investors navigating complex exit strategies matters so much. While you’ll find many nearby financial advisors who can help with general financial planning, identifying one with deep, specific expertise in DSTs, 721 exchanges, and fiduciary-first real estate exit planning is a different search entirely.
The good news: advisors like Carl E. Sera, CMT, of Sera Capital in Annapolis, Maryland, offer virtual services nationwide, meaning geography doesn’t have to limit your access to genuine expertise.
Key Takeaways
A Delaware Statutory Trust lets real estate investors exit active property management through a 1031 exchange — without an immediate capital gains tax bill.
DSTs allow investors to exchange out of actively managed properties and into professionally managed real estate — multifamily communities, industrial assets, medical offices, and net-lease portfolios — while deferring taxes through a 1031 exchange. For many tired landlords, the appeal isn’t the legal structure itself; it’s the simplification, diversification, and freedom from active management it provides.
Whether a DST or 721 UPREIT exchange is right for you depends on your long-term goals — not just your tax situation.
A traditional DST preserves your ability to complete future 1031 exchanges, while a 721 exchange converts your interest into operating partnership units of a larger REIT — offering potential advantages in diversification, liquidity, and multigenerational estate planning. The right choice starts with a clear understanding of what you’re actually trying to accomplish, not which structure defers the most tax today.
The most costly DST mistake isn’t choosing the wrong structure — it’s waiting too long to start planning.
Investors who don’t begin the planning process until a property is already under contract face tighter timelines, narrower options, and reactive decision-making. Starting the conversation months before a sale — and working with a fee-only fiduciary rather than a commissioned broker — gives you the time and unbiased guidance needed to choose the structure that genuinely fits your goals.
Financial Advisors Who Specialize in DSTs and 721 Exchanges
💡 In the Q&A below, you’ll gain insights from a financial advisor who specializes in helping real estate investors transition from active property ownership into passive real estate through Delaware Statutory Trusts, 721 exchanges, and 1031 exchange strategies while minimizing tax exposure and simplifying long-term estate planning.
🙋♀️ Do you have questions not answered below? Use the form on this page to submit your questions. You can also contact the financial advisors featured in this article directly to set up an introductory call or ask your questions by email.
💸 Get to Know Financial Advisors Who Specialize in DSTs and 721 Exchanges
This page is organized into sections to help you quickly find the information you need and get answers to your questions:
- Q&A with Financial Advisors Specializing in DSTs and 721 Exchanges
- Get Answers to Your Questions About DSTs and 721 Exchanges
- Browse Related Articles
Q&A: Financial Advisors Specializing in DSTs and 721 Exchanges
Answers to DST and 721 Exchange Questions with Carl E. Sera, CMT | President & Managing Principal, Sera Capital
We asked Annapolis, Maryland-based financial advisor Carl E. Sera, CMT, who works exclusively with real estate investors navigating complex exit strategies, to answer the questions his clients ask most often when they’re ready to stop managing properties and start planning what comes next. As president and managing principal of Sera Capital, a fee-only fiduciary firm, Carl advises high-net-worth individuals, families, and financial advisors nationwide on 1031 exchanges, DSTs, and 721 UPREIT structures.
Q: What exactly is a Delaware Statutory Trust (DST), and why are more real estate investors using them?
Carl: Most people don’t wake up wanting to invest in a Delaware Statutory Trust. They reach a point where they’re simply tired of being landlords. Over the past several years, we’ve seen more real estate investors looking for a way to transition from active property management into passive real estate ownership without immediately triggering a large capital gains tax bill. That’s where DSTs have become increasingly popular.
A DST allows investors completing a 1031 exchange to move from active property management into professionally managed real estate ownership through assets such as multifamily communities, industrial properties, medical offices, and net-lease portfolios. For many of our clients, it’s less about the legal structure itself and more about what it represents: simplification, diversification, and freedom from active management.
Q: What’s the difference between a DST and a 721 UPREIT, and when does one make more sense than the other?
Carl: Many investors mistakenly think the DST is the end goal. Increasingly, we view it as one step in a broader transition from direct property ownership into professionally managed real estate. A traditional DST is typically designed to help investors complete a 1031 exchange and remain in real estate ownership. A 721 exchange goes a step further by allowing investors, over time, to convert into operating partnership units of a larger REIT structure.
For some families, that creates meaningful advantages around diversification, estate planning, liquidity, and simplifying multigenerational wealth management by moving from one or two concentrated properties into exposure across hundreds or even thousands of properties. That said, there’s no universal answer. Some investors prefer traditional DSTs because they want to preserve the ability to continue completing future 1031 exchanges. Others are more focused on long-term passive ownership and estate simplification, where a 721 structure may be more appropriate.
The key is understanding what the investor is actually trying to accomplish before choosing the structure.
Q: Why does it matter whether your 1031 and DST advisor is a fee-only fiduciary rather than a commission-based broker?
Carl: This is one of the most important and least discussed aspects of the DST industry. Historically, many DST investments were sold through commission-based broker-dealers, where advisors may be compensated differently depending on which product or sponsor they recommend. Investors should understand exactly how their advisor is being compensated before making a multi-million dollar real estate decision.
As a fee-only fiduciary firm, we waive commissions entirely and work solely on behalf of the client. That changes the dynamic of every conversation. Instead of asking “which product pays the highest commission,” the focus becomes “what structure actually makes the most sense for this client’s goals, tax situation, liquidity needs, and long-term plan?”
It also allows us to work collaboratively with existing financial advisors, CPAs, attorneys, and family offices, many of whom simply want a trusted fiduciary partner to help navigate the complexity while they maintain the long-term client relationship.
Q: How can a DST be used as part of an estate planning strategy, and what happens to a DST investment when the owner passes away?
Carl: For many of our clients, estate planning eventually becomes just as important as tax deferral. One reason DSTs and 721 structures have grown more popular is that they can help older investors simplify ownership while creating a smoother transition for heirs. Instead of leaving behind multiple actively managed properties, investors may be able to consolidate into professionally managed real estate with centralized reporting and administration.
Generally speaking, when a DST investor passes away, their heirs receive a step-up in cost basis based on the fair market value at the date of death, which can significantly reduce or even eliminate the deferred capital gains tax burden for the next generation. Every family’s situation is different, and these strategies should always be coordinated with an estate planning attorney and CPA.
But for many clients, the conversation gradually evolves from “How do I defer taxes today?” to “How do I simplify this for my family long term?”
Q: What’s the most common mistake you see real estate investors make when approaching a 1031 exchange or DST, and how can they avoid it?
Carl: Waiting too long.
A surprising number of investors don’t start planning until their property is already under contract or about to close. At that point, the clock is ticking, options narrow quickly, and decisions become reactive rather than strategic. The investors who tend to have the best outcomes start the conversation earlier, sometimes months before a sale, which gives them time to evaluate structures thoughtfully, coordinate with their CPA and attorney, and determine whether a DST, a 721 exchange, an Opportunity Zone strategy, or simply paying the tax is actually the right fit.
The other common mistake is focusing only on tax deferral rather than the bigger picture. Taxes matter, but the investment itself matters more. A good strategy should improve the investor’s overall quality of life and financial position, not just postpone a tax bill.
Get to Know Carl Sera, Specialist in DSTs and 721 Exchanges:
View Carl’s profile page on Wealthtender or visit his website to learn more.
Carl E. Sera, CMT, is President and Managing Principal of Sera Capital Management, a fee-only fiduciary firm focused on complex real estate exit planning. He works with high-net-worth individuals, families and financial advisers to navigate the transition from concentrated real estate positions into more diversified, portfolio-oriented investments in a tax-efficient manner.
Carl advises financial advisers and their clients nationwide on complex real estate decisions, including 1031 and 721 exchanges, and how those transitions integrate with broader portfolio construction and long-term investment strategy.
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About the Author
Brian Thorp
Brian is CEO and founder of Wealthtender and Editor-in-Chief. He and his wife live in Austin, Texas. With over 25 years in the financial services industry, Brian is applying his experience and passion at Wealthtender to help more people enjoy life with less money stress. Learn More about Brian