Brokers: Offer This When it's Time for a Price Reduction

As a broker, you're always looking for ways to provide the best value to your clients. One strategy that can be incredibly beneficial, especially in a market where prices are going down, is the use of an Installment Sale Trust (IST). This financial strategy can help your clients save big on taxes, putting more money in their pocket, and allowing you to lower the price of the business or property without the owner taking a hit.

What is an Installment Sale Trust (IST)?

An Installment Sales Trust (IST) is a trust arrangement that combines special-purpose vehicles with installment sales. This financial strategy is commonly used in property transactions, especially mergers and acquisitions or the sale of a business, to defer capital gains tax over time.

How Does an Installment Sale Trust Work?

The process of an Installment Sale Trust involves several steps[^1^]:

1. The seller sells the asset to the Trust in exchange for a Secured Note.

2. The Trust sells the assets to the buyer, and the proceeds come back to the Trust.

3. The Trustee invests the proceeds for a significant return.

4. The note pays out quarterly income.

5. At the 10th year, the Trust pays out the proceeds and growth returns or renews for another 10 years (Like a refinance). This can go on for generations.

How Can an IST Benefit Your Clients?

An IST is an excellent tool for tax-deferred growth, leveraging the power of compounding interest. When your client sells an asset through an IST, the proceeds from the sale are invested by the trustee. The money in the trust isn't taxed until it's withdrawn, which allows it to grow over time without the immediate burden of taxation. This offers three distinct levels of compounding interest:

1. Interest on Principal: The principal is invested, or the initial money from the asset's sale. The returns or interest from this investment are added back to the principal, thus increasing the total amount of money that can earn interest.

2. Interest on Interest: As the interest from the principal is reinvested and generates its own interest, this second layer of compounding comes into play. Over time, this can significantly increase the growth of the investment.

3. Interest on Taxes Saved: Finally, because the money in the IST is not immediately taxed, the amount that would have gone towards taxes is instead earning interest. This is effectively another layer of compounding, allowing the funds that would have been lost to taxes to contribute to the overall growth of the trust.

How Can This Help Lower the Price?

By using an IST, your client can defer the capital gains tax over time. This means that they will have more money in their pocket, as they will not have to pay the taxes immediately. This extra money can then be used to lower the price of the business or property without the owner taking a hit. This strategy is particularly useful in a market where prices are going down, and the owner does not want to lower the price of their property or business.

Want to Offer Your Clients an IST?

As a broker, your role is to provide the best possible value to your clients. By understanding and utilizing an Installment Sale Trust, you can help your clients save big on taxes and potentially lower the price of their property or business without them taking a financial hit. This strategy can be a game-changer, especially in a market where prices are going down.

CommQuality offers tools and partnerships for commercial brokers to get more deals. Our financial partners will join in on your meetings to discuss the IST, removing selling barriers and accelerating deals. We provide you with the resources and how-to guides for offering IST to your clients for as little as $19/mo.

By partnering with us, you can:

• Keep 100% of Commission (or even offer higher prices)

• Become a Hero to Your Client

• Utilize the Installment Sale Trust (IST) as a competitive edge

• Bullet-proof your outreach sequence

• Digitally expand & delegate for more leads

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FAQs

**Q: What is

an Installment Sale Trust (IST)?**

A: An Installment Sales Trust (IST) is a trust arrangement that combines special-purpose vehicles with installment sales. This financial strategy is commonly used in property transactions, especially mergers and acquisitions or the sale of a business, to defer capital gains tax over time.

Q: How does an Installment Sale Trust work?

A: The process of an Installment Sale Trust involves several steps:

1. The seller sells the asset to the Trust in exchange for a Secured Note.

2. The Trust sells the assets to the buyer, and the proceeds come back to the Trust.

3. The Trustee invests the proceeds for a significant return.

4. The note pays out quarterly income.

5. At the 10th year, the Trust pays out the proceeds and growth returns or renews for another 10 years. This can go on for generations.

Q: How can an IST benefit my clients?

A: An IST is an excellent tool for tax-deferred growth, leveraging the power of compounding interest. When your client sells an asset through an IST, the proceeds from the sale are invested by the trustee. The money in the trust isn't taxed until it's withdrawn, which allows it to grow over time without the immediate burden of taxation. This offers three distinct levels of compounding interest: Interest on Principal, Interest on Interest, and Interest on Taxes Saved.

Q: How can this help lower the price of a property or business?

A: By using an IST, your client can defer the capital gains tax over time. This means that they will have more money in their pocket, as they will not have to pay the taxes immediately. This extra money can then be used to lower the price of the business or property without the owner taking a hit. This strategy is particularly useful in a market where prices are going down, and the owner does not want to lower the price of their property or business.