Does a DST interest go through probate, or does my living trust carry it past probate?

Delaware makes the interest personal property, so in your own name it is probate property at home

The Delaware Statutory Trust Act settles what you own. Section 3805(c) says a beneficial owner's interest 'is personal property notwithstanding the nature of the property of the statutory trust' and that, unless the governing instrument provides otherwise, 'a beneficial owner has no interest in specific statutory trust property'. For income tax you own a slice of the real estate under Rev. Rul. 2004-86; for title, transfer and probate you own an intangible, like a partnership unit.

A building in another state is real property administered where it sits, which is why Florida's section 734.102 opens with 'if a nonresident of this state dies leaving assets in this state' and sets out who may receive ancillary letters. Exchange three out-of-state rentals into DST interests and your estate holds one kind of personal property, administered at home, instead of three ancillary proceedings.

The interest keeps every DST risk: it cannot be redeemed, there is no public market for it, and the property behind it can lose value. Probate convenience is a reason to title it carefully, not a reason to buy it.

Titled in a revocable living trust, the interest passes by the trustee's signature, not a court's order

A revocable living trust avoids probate because the trustee already holds legal title; your death only changes who the trustee is. If the subscription was signed in the trust's name, the successor trustee sends the sponsor a death certificate, a certification of trust and a W-9, and the sponsor redirects the distributions and the annual grantor statement; the steps are in transferring DST interests to heirs and trusts.

Avoiding probate does not mean avoiding the estate's debts. Florida's section 733.707(3), for example, makes a trust the decedent could revoke at death 'liable for the expenses of the administration and obligations of the decedent's estate to the extent the decedent's estate is insufficient to pay them'. The trust is a title device, not a shield.

Nor does the trust change the exchange. Under section 676(a) the grantor is 'treated as the owner of any portion of a trust' where the power to revest title 'is exercisable by the grantor', so the trust and you are the same taxpayer, and you may sell in your own name and subscribe in the trust's name or the reverse, as selling in your own name and buying in your revocable trust explains.

If the interest is in your own name, a small-estate affidavit may move it without full administration

Most states let a successor collect a decedent's personal property by affidavit when the estate is small. Arizona's section 14-3971(B) allows it 'thirty days after the death of a decedent' when 'the value of all personal property in the decedent's estate, wherever located' does 'not exceed $200,000 as valued as of the date of death'; the real-property version waits six months and caps at $300,000. Washington's RCW 11.62.010 works 'at any time after forty days from the date of a decedent's death' for a probate estate that 'does not exceed one hundred thousand dollars'.

The thresholds and waiting periods are the state's, and the sponsor's transfer agent decides which documents it will accept. A position worth more than the home state's limit, held in an individual name, goes through ordinary probate: letters of administration before the sponsor will retitle anything and before the heirs can act.

The practical rule: subscribe in the trust's name, or retitle into the trust while you are alive. The retitling is a sponsor form with no federal tax consequence.

Probate or not, the federal result is the same: estate inclusion and a stepped-up basis

Property in your own name is in the gross estate under section 2033, which reaches 'all property to the extent of the interest therein of the decedent at the time of his death'. Property in a trust you could revoke is included under section 2038(a)(1), which covers transfers 'where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power' to 'alter, amend, revoke, or terminate'. Either way the full value counts; for 2026 the basic exclusion amount is $15,000,000, so most DST estates owe no estate tax, and does a 1031 reduce estate tax covers that side.

The step-up follows the inclusion. Section 1014(b)(1) covers property acquired 'by bequest, devise, or inheritance', and section 1014(b)(2) and (b)(3) cover property the decedent transferred 'in trust' with 'the right reserved to the decedent at all times before his death to revoke the trust' or to alter, amend or terminate it. Heirs of a trust-held interest take it at date-of-death value exactly as heirs of an interest held outright do; the step-up on 1031 property explains what that erases.

Worked example: two sisters, two titlings, two very different first months

Round hypothetical figures; confirm the thresholds and the trust wording with your attorney. Two sisters each exchange a $700,000 rental into DST interests: one subscribes in her own name, the other as trustee of her revocable living trust, naming her son as successor trustee.

At the first sister's death her $700,000 interest is personal property far above any small-estate limit, so her executor petitions for letters and only then sends the sponsor the paperwork to retitle the interest to the estate and later to the heirs. Distributions accumulate in an account nobody can touch meanwhile.

At the second sister's death her son signs a certification of trust, attaches the death certificate and a W-9, and the sponsor retitles the interest to him as trustee in its normal processing time. Both sets of heirs take the interests at $700,000 under section 1014; the difference is months and legal fees, not tax.