Delaware Statutory Trusts (DSTs) have become an increasingly popular tool for real estate investors looking for tax efficiency, passive income opportunities, and portfolio diversification. For farmland owners and agricultural real estate investors, DSTs can offer a unique way to stay invested in land while stepping away from the day-to-day responsibilities of ownership and management.
A Delaware Statutory Trust is a legal entity created under Delaware law that allows multiple investors to pool capital and own fractional beneficial interests in real estate held by the trust. Rather than purchasing and managing an entire property independently, investors own a proportional share of a professionally managed real estate asset or portfolio.
One of the primary reasons DSTs have gained attention is their treatment under Section 1031 of the Internal Revenue Code. The Internal Revenue Service recognizes qualifying DST interests as like-kind replacement property for 1031 exchanges. This allows investors who sell appreciated real estate—including farmland—to defer capital gains taxes by reinvesting sale proceeds into DST interests rather than purchasing another property outright.
For many farmland owners, this creates a compelling option during ownership transitions. A landowner selling highly appreciated farmland may face significant capital gains exposure. Traditionally, avoiding those taxes through a 1031 exchange required identifying and acquiring another qualifying property within strict IRS deadlines. That process can be stressful, especially in competitive land markets where desirable replacement properties may be limited.
DSTs can simplify that process. Because investors purchase fractional interests in already-acquired institutional-grade properties, they often provide access to replacement options that are easier to identify within the exchange timeline. This can reduce the pressure of finding and closing on an entire replacement farm or ranch before deadlines expire.
For farmland investors specifically, DSTs may offer access to larger and more diversified agricultural holdings than most individuals could purchase on their own. These portfolios may include row crop farmland, permanent crop operations, ranchland, or agricultural infrastructure spread across multiple geographic regions. Diversification across markets, crops, and operators can help reduce exposure to localized weather events, commodity volatility, or regional economic shifts.
Another major advantage is professional management. DST properties are typically operated by experienced asset managers who oversee leasing, tenant relationships, capital improvements, and operational decisions. For investors who no longer want the responsibilities of active landownership—or who live far from their investment properties—this passive structure can be highly appealing.
This can be particularly attractive for retiring farmers or absentee landowners. Rather than managing lease negotiations, maintenance issues, irrigation oversight, or tenant transitions, investors receive income distributions based on their ownership percentage while professional managers handle day-to-day operations.
Lower minimum investment thresholds also make DSTs accessible to a broader range of investors. Instead of needing several million dollars to acquire high-quality agricultural land directly, investors may be able to participate with substantially less capital, depending on the offering.
That said, DSTs are not without limitations.
One of the biggest tradeoffs is loss of control. Investors do not make operational or strategic decisions regarding the property. Decisions related to leasing, refinancing, improvements, or eventual sale are handled by the trust sponsor or asset manager. For farmland owners accustomed to direct oversight, this can feel restrictive.
Liquidity is another consideration. DST interests are generally illiquid and intended to be held for a set investment period, often five to ten years. Exiting early may be difficult or impossible without substantial discounts. Investors should be comfortable committing capital for the long term.
Transparency can also vary between sponsors. Because performance depends heavily on management quality, due diligence is critical. Investors should carefully evaluate the sponsor’s experience, fee structure, property underwriting, and track record before committing capital.
Recent trends in agricultural investing have increased interest in professionally managed farmland as investors seek inflation-resistant assets and long-term income potential. Farmland has historically been viewed as a stable real asset with low correlation to traditional stock and bond markets, making it attractive within diversified portfolios.
For Nebraska farmland owners considering a sale, a DST may offer a practical strategy for preserving tax deferral while maintaining agricultural real estate exposure. However, these structures are complex investments with legal, tax, and financial implications.
Before pursuing a DST—especially as part of a 1031 exchange—it is essential to consult qualified tax, legal, and financial advisors. Careful evaluation can help determine whether this passive investment vehicle aligns with your long-term financial goals, risk tolerance, and estate planning strategy.
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AgWest Land Brokers can help you understand the results of a farmland assessment before you make a decision to purchase. or sell To see how we can help call 866-995-8067, send an email, or fill out our convenient web form.