Paul

1. Discretionary trusts enable the trustee to distribute the income of the trust to a wide range of beneficiaries. This is usually done with tax in mind so that someome with a low income will get more than someone with a higher income. If everyone is on a highish income then it is possible to distribute to a company and cap the rate at 30%. The best thing is that the trust is discretionary so the trustee can vary the amounts each year.

2. With discretionary trusts no one beneficiary has any fixed interest. So if a beneficiairy were to go bankrupt the trustee in bankruptcy could step into their shoes, but they would have no rights over the trust assets and only the right to be considered for a distribution from the trust. The trustee would not normally distribute to the bankruptcy trustee but to other family members in stead.

But, if someone transfers property to a trust (or anyone actually) then these transactions can be undone under many circumstances. If the reason for the transfer was to defeat creditors (ie asset protection!) then the transfer can be unwound indefinitely. If it was done with a sale for market value then the period may be 5 years.

3. SMSF have considerable advantages. Great asset protection and when in the pension phase tax free income and CGs. Developing may be difficult thought.

In NSW there is not land tax free threshold for companies or trusts so 1.6% on $1 and up in land value. But with that many properties she would probably have used up her land tax free threshold anyway.

I don’t think that clause would protect you as trustees if you are sued by the other trustess. I was thinking of another clause regarding resolving disagreements between trustees.

You forgot to tell me what state the trust is set up under as this will effect the above and the duty. I think you may find that there could be duty on the transfer of the units and there would be CGT at market rates too. You would have to check all this with a lawyer.

There are 2 things you need to consider,
1. Transferring the units
2. transferring the ownership

Now the properties are owned by 4 people as trustees. That means all 4 names are on the title deeds to the properties and all loans. If you want to get out of the arrangement then you will need to get off the title deeds and the loans.

There are stamp duty issues on the transfer of the title as well as the units. It could be that the trustee being changed is only a nominal duty of about $50. But this would depend on if the ownership of the units is the same.

If you had a company originally then the ownership wouldn’t change. You would just pass over control of the company to the otherside and then change the units over to them too. I mean a company which you control here too, not an externally controlled one. Its probably not worth doing now as you would need to redo the loans on the change of the company.

In that case then you will have more leverage and a safer position. Its unfortunate that you didn't have a company as trustee as if you were to transfer your units to them and get out of the trust altogether you would have to change the trustee and change all the title deeds and reapply for loans etc.

Have a read of the trust deed and see if there are any provisions in there regarding dispute resolutions. I assume you would both control 50% each and so you couldn't outvote each other. You could probably force a sale by going to court if the deed is silent on this. I don't know about her getting costs out of you, probably she would have a hard time with that.

Whatever you do now keep the idea that there may be a dispute in court later and make sure you keep evidence of everything. Maybe try to communicate via email and be careful what you write. Best to try and negotiate your way out without going to court and lawyers etc as it could be very expensive.

What State is the Unit trust governed by? It will be in the deed somewhere. You might want to look at the trustee act for that state.

8.5% pa capital gain for the next 20 years is extremely high!

I am a former broker turned solicitor but I am now thinking about getting back into broking to work it in with my law work ( I like estate planning and structures etc).

There are so many regulations with broking now it is amazing. Even rules on how you need to back up your computer files. In the good old days we just wrote the loan and faxed it off. Now you need to enter into contracts with the client, make sure they have the ability to service the loan, look out to terrorists (report anyone with a beard) and etc etc. You do all that work and you may not even get trails until the second year and then the client sells the house after 17 months and you have to give it all back!

You also have to compete with those brokers who give back their commissions. I have found that some people just use you for the expertise and then disappear at the last min and possibly go to one of these brokers to get some of the comm back. So to prevent this I think you have to charge a small brokerage amount, maybe $500, to help prevent this. But if you do this then maybe you woudn't get as many clients.

Josh,

It would be possible to split the loan into 2 so Henry could have one for the land and one for the construction. I dont' really think there is any benefit to this though.

I was wondering about the stamp duty too. Maybe the builder is paying it by including it in the price of the land.

Henry, good way to learn things isn't it!

Of course it is legal to have someone pay you rent for your PPOR. Whether you can still get the FHOG is a different matter, but without looking into it I would think it could be possible if you are still living there for at least 6 months.

Tax is a separate issue to consider and you would lose the CGT exemption on part of the property possibly

Property in Japan generally goes down in value.

After 20-30 years you would need to rebuild too. the construction there is different and not as sturdy as Australia.

Where abouts are you looking at?

I am going to Osaka in a couple of weeks.

Sounds like you are doing it wrong.

Having the loans in 2 names is doubling the risk without providing any benefit. It may not be possible for your wife to get the loan in her own name, for the LOC I mean, if she has no income, in that case it may be unavoidable. But if your wife has income then she should get the loan and on-lend the LOC money to you or to the trust. There is no sense in putting your name on the LOC as it will limit your borrowing capacity and add to the risk.

Don't transfer your house from one to 2 names as this will also weaken the asset protection. If you go bankrupt you will lose half the house. Only consider if your wife is at risk of getting sued – and even then the asset protection will be limited.

Your borrowing is limited to what you can afford to repay. This comes down to your salary and rental income compared to your existing debt. If you also have a $300,000 LOC then this will severely limit you. If you wife has one then less so.

Li – you send me a message somehow, but you are not set up to receive replies.