Estate Planning Benefits of 721 UPREIT Structures

Simplifying the Transition of Wealth

Estate planning is often one of the most overlooked components of real estate investing. For investors holding Delaware Statutory Trusts (DSTs), the question of “what happens next?” becomes critical—not just for the investor, but for their heirs. One powerful tool to simplify this transition is the 721 UPREIT structure, which allows certain types of DST owners to exchange their interests for Operating Partnership (OP) units within a Real Estate Investment Trust (REIT).

By converting into OP units, investors may gain a clearer and more flexible path for estate transfers compared to managing fractional DST ownership or multiple replacement properties through continued 1031 exchanges.

Step-Up in Basis at Death

One of the most valuable estate planning benefits of UPREIT structures is the step-up in basis. Upon the investor’s death, heirs typically receive the OP units with a cost basis equal to the fair market value at the date of death.

This means:

• Deferred capital gains taxes are eliminated for the heirs.
• Heirs can convert the OP Units into REIT shares and sell them (subject to the capacity constraints of the REITs Share Repurchase Program) without the burden of decades of accumulated capital gains.
• Families are positioned to maximize wealth transfer without unnecessary tax erosion.

This provides peace of mind for investors who may have been concerned about passing on complex tax liabilities.

Multigenerational Planning with Liquidity Options

Another key advantage of the 721 UPREIT path is its flexibility for heirs. While DSTs are illiquid and require sponsor-driven exits, OP units can ultimately be converted into REIT shares. This opens the door to liquidity options, including:

• Immediate diversification into a broad REIT portfolio rather than managing individual DST assets.
• Gradual liquidation of REIT shares to manage income needs and tax exposure over time.
• Retention for income if heirs prefer to keep the REIT shares for dividends and potential appreciation.

This flexibility is particularly important in multigenerational wealth planning, where heirs may have different financial needs and risk preferences.

Reducing Complexity in Estate Administration

Families inheriting multiple DST positions often face significant complexity. Each DST may have its own timeline, sponsor policies, and liquidation process. In contrast, by rolling into a 721 UPREIT before death, the estate consolidates into a single pool of OP units.

This simplifies:

• Estate valuation for probate purposes.
• Distribution of assets among multiple heirs.
• Ongoing management, since REIT shares are easier to divide and administer than illiquid real estate positions.

Considerations for Investors

While the 721 UPREIT path provides significant estate planning benefits, investors should weigh key factors:

• Loss of 1031 Eligibility
  Once DST interests are converted into OP units, they cannot be used for future 1031 exchanges.
• Net Asset Value Exposure
  REIT share values can move up and down which may not align with every family’s strategy.
• Sponsor Differences
  Estate planning benefits depend on the specific REIT sponsor’s structure, conversion, and share repurchase terms.

How 721 UPREIT Solution presented by Corcapa 1031 Advisors Can Help

At 721 UPREIT Solution presented by Corcapa 1031 Advisors, we help investors see beyond the immediate 1031 exchange. Estate planning is a vital part of preserving wealth across generations, and the 721 UPREIT structure can be an important tool in that plan.

We work with clients to:

• Clarify the step-up in basis implications,
• Map out multigenerational wealth strategies, and
• Coordinate with estate attorneys and tax advisors to ensure the plan fits seamlessly into their broader financial picture.

Final Thoughts

The 721 UPREIT structure is not just a liquidity strategy—it’s a powerful estate planning tool. By simplifying asset transfers, providing a step-up in basis, and offering heirs greater flexibility, UPREITs can play a central role in preserving and passing on wealth.

For investors looking to align their real estate portfolio with their estate plan, 721 UPREIT Solution presented by Corcapa 1031 Advisors is here to guide the way.