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Trust Certificate

A Trust Certificate refers to a document that serves as evidence of an investor’s beneficial interest in a DST. A DST is a legally recognized trust that is set up for the purpose of conducting business, including investment in income-producing real estate.

Here’s a bit more detailed explanation:

  1. Delaware Statutory Trust (DST)
    • This is a trust created under Delaware statutory law, which allows for the establishment of a legal entity that can hold title to investment properties.
    • Investors in a DST own a “beneficial interest” in the trust, rather than direct ownership of the real estate. This structure can provide liability protection and tax advantages.
  2. Trust Certificate:
    • Represents the ownership or beneficial interest an investor has in the DST.
    • Indicates the rights, profits, and obligations attached to the ownership, such as distributions from income generated by the DST-owned assets.
    • Functions somewhat similarly to shares in a company, except it pertains to a trust structure.
    • Used as proof of investment and can be critical for accounting and tax purposes.
  3. Role in the Industry
    • Trust certificates are important in the DST industry because they formalize the investment and provide a clear record of each investor’s interest.
    • They are used when DSTs are structured for 1031 exchanges, allowing investors to defer capital gains taxes by reinvesting proceeds from the sale of one property into a new property through a DST.

It’s important to note that the specifics of Trust Certificates can vary widely and are subject to the governing documents of the DST, as well as federal and state laws. Investors typically review these documents with their attorneys or financial advisors to understand the implications of their investment and the nature of the rights and obligations conferred by the Trust Certificates.