How Deferred Sales Trusts Work with Market Investments to Reduce Capital Gains Taxes—And How Annuities Can Enhance the Strategy

If you’re an investor with significant gains in market investments—whether from stocks, real estate, or a business sale—you may be facing a hefty capital gains tax bill when you decide to sell. Fortunately, a Deferred Sales Trust (DST) provides a powerful solution to legally defer taxes, reinvest your proceeds, and preserve your wealth.

At Pennington Law, we specialize in advanced estate and tax planning strategies, and we are proud to have been recognized as the Best Deferred Sales Trust Law Firm of 2025 by Best of the Best.

Let’s break down how a DST works and how pairing it with a market-driven annuity featuring a 22% bonus and enhanced death benefits can supercharge your financial future.

What Is a Deferred Sales Trust (DST)?

A Deferred Sales Trust is a legal tax-deferral strategy that allows investors to sell highly appreciated assets without immediately triggering capital gains taxes. Instead of selling your assets outright and paying taxes on the gains, you transfer them into a trust. The trust then sells the asset and structures payments to you over time, allowing for tax deferral and reinvestment into other opportunities.

How It Works for Market Investments

Many investors accumulate substantial wealth in the stock market over time. However, when it’s time to cash out, capital gains taxes can significantly erode profits. A Deferred Sales Trust can be an effective tool for mitigating this tax burden while keeping your funds working for you.

Step-by-Step Process

1.Sell the Asset to the Trust

Instead of selling your stock, business, or investment directly to a buyer, you sell it to a trust in exchange for a structured installment note (a promissory note).

2. The Trust Sells the Asset

Since the trust is a tax-neutral entity, it can sell the investment without immediate capital gains tax consequences.

3. Proceeds Are Reinvested—Maximizing Wealth with an Annuity

One of the most powerful reinvestment options for DST proceeds is a fixed indexed annuity with market-driven returns, a 22% upfront bonus, and an enhanced death benefit.

4. Tax-Deferred Payments to You

You receive structured payments over time based on the terms you establish, allowing you to control your taxable income while benefiting from market-driven growth and financial security.

Why a Fixed Indexed Annuity Works Well with a DST

A Deferred Sales Trust allows for flexible reinvestment, and one of the most tax-efficient and protective vehicles is a fixed indexed annuity. Here’s why:

• 22% Upfront Bonus – When DST proceeds are placed into an eligible annuity, the account immediately benefits from an upfront bonus of up to 22%, increasing the total principal and compounding long-term growth.
• Market-Driven Growth Without Market Risk – This strategy allows you to capture upside market returns while protecting your wealth from stock market downturns.
• Tax Deferral on Growth – Since annuities grow tax-deferred, your money compounds without immediate tax liability—aligning perfectly with the DST’s tax-deferral advantages.
• Enhanced Death Benefit Nearly Double the Investment – Many annuities offer enhanced death benefits, ensuring that your heirs receive nearly double your original investment, providing a built-in estate planning advantage.
• Steady, Predictable Income – The annuity allows you to create guaranteed lifetime income, supplementing the installment payments from your DST while ensuring you never outlive your wealth.

How This Strategy Protects Your Legacy

By integrating a Deferred Sales Trust with a high-value annuity, you achieve:

• Significant capital gains tax deferral – Keeping more of your money invested and working for you.
• Upfront wealth enhancement – The 22% bonus instantly increases your investable assets.
• Secure, market-driven returns – Earning growth without downside market risk.
• A powerful estate planning tool – Leaving your family with a guaranteed enhanced death benefit nearly double your original investment.

Why Choose Pennington Law for Your DST Strategy?

At Pennington Law, we specialize in advanced wealth protection and tax strategies, including Deferred Sales Trusts and tax-advantaged investment solutions. Our firm was recognized as the Best Deferred Sales Trust Law Firm of 2025 by Best of the Best, reflecting our expertise and commitment to helping high-net-worth clients safeguard their wealth.

If you’re considering a sale of highly appreciated investments and want to protect your profits while minimizing taxes, our team can help you explore whether a Deferred Sales Trust with an annuity is the right strategy for you.