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Trust Expense

A trust expense typically refers to the costs associated with the administration and operation of the trust itself.

Trust expenses in a DST can include a variety of costs, such as:

  1. Management Fees: Fees paid to the trustee or to the management company for managing the investment and handling the day-to-day operations of the trust.
  2. Legal and Professional Fees: Costs for legal advice, accounting services, and other professional services that the trust may require.
  3. Maintenance and Repairs: If the trust holds real estate, there will be ongoing maintenance costs, as well as potential repair expenses to maintain the value of the properties.
  4. Taxes and Insurance: The trust must pay any real estate taxes due on properties it owns, as well as insurance premiums to protect its assets.
  5. Marketing and Advertising Costs: If the trust is actively seeking new tenants for its properties, there may be marketing and advertising expenses involved.
  6. Loan Servicing Fees: If the trust has taken on debt to finance its properties, there will be costs associated with servicing that debt.
  7. Administrative Expenses: These are the day-to-day operational costs, such as office supplies, utilities, and communication expenses for the trust’s administrative functions.
  8. Distributions: While not an expense in the traditional sense, DSTs are obligated to distribute income to investors, which can be considered an outflow of funds.
  9. Regulatory Compliance: Expenses related to ensuring the trust remains in compliance with state and federal regulations, including the costs associated with filing necessary reports and maintaining proper registrations.

Trust expenses are significant because they can impact the overall return on investment for the beneficiaries of the trust. Higher expenses can lower the net income that is distributable to investors. When evaluating a DST for investment purposes, it’s important to carefully consider the fee structure and trust expenses, as they can affect the profitability and financial health of the trust.