hello,
these are very good forums, most enjoyable to read. Could anyone indicate when it would be appropriate to shift assets to a trust. I have heard stamp duty and the like can be expensive if you don’t put investments in the right place at the start.
I earn around 45000 gross and have 10000 in shares. Of course I would love a CF+ IP but very short on time at present!
Many thanks in advantance.
Hi Silverbullett77
It depends why you want to have a trust, is it for tax minimisation, asset protection or both?
We set up our family trust after we had prepared our property investing plan which ment identifying how many properties we want/need to own to meet our goal. To this end we were in a position where a trust was the right thing to set up. So we set it up before we went any further withour investing.
Transfering assets to a trust is the same as selling them they do incur stamp duty and CGT.
CHeers
Leigh K[
]Carve your own path and lead the way …
If I could get both that would be pretty good! But to select between the two I would choose asset protection.
Any idea on the costs of setting up a trust? – edit: sorry, just found out in another post!
If you are going to be serious about investing, then do it sooner rather than later. It may not be worth transferring existing assets becuase of CGT and stamp duty etc, but any future assets could be held in the trust. Go and talk to a good accountant. It would only cost you about $200 for some advice.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Terry, Would it be worth while transferring a PPOR into a trust if it’s CGT free?
C2
“Is it true the more you owe the more you grow until the bank steps in?”
C2
Maybe. It depends if you are going to rent it out and then buy another PPOR. eg if your home is almost paid off and you are going to move out and rent it, and need a loan to buy the new PPOR. You don’t want to be paying tax on the rent while paying undeductible interest on your new home loan.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry, I will check this out more later.
C2
“Is it true the more you owe the more you grow until the bank steps in?”I know we all hate cross collateralisation (no wonder people just write x coll![
]), but one way to protect ourselves if we do have some in our own name is to use the properties outside of the trust as security for those being purchased in the trust.This way, if you have the unfortunate circumstance of being sued, the person suing you should see that there is not a whole lot of equity available to them, esp after selling costs etc. are taken out first, so they may just go away.
Cheers
MelMel
Good point! cheap, simple and easy.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Mel, Will lenders allow this or will they see it as an unnecessary risk? Also would this include the tax man? Finally, if you had equity in an IP could you take out an LOC and use this as deposits for the IP’s the trust buys and also use the IP as security?
C2
“Is it true the more you owe the more you grow until the bank steps in?”Hi C2.
‘Will lenders allow this or will they see it as an unnecessary risk? ‘ What’s the risk? If you are the director, and you are signing a guarantee anyway, it seems to me that it would just form part of that.
‘Also would this include the tax man?’ Don’t see why it would – you are just offering the ‘security’. There is no funds changing hands, and the trust is still responsible for all borrowings, except if going belly up, then the bank will come after the security. No different to if you owned two properties in same structure that were x coll.
‘Finally, if you had equity in an IP could you take out an LOC and use this as deposits for the IP’s the trust buys and also use the IP as security’
This is the same thing isn’t it? If you max out the equity by using an LOC I don’t know if the bank would be interested in the ‘rest’ of the property as security? For asset protection, I would ‘give’ the houses to the bank as security, cos then they have the whole thing, whereas with an LOC, you still have 20% available. If you can do both, then bonus!
Cheers
MelHi Mel,
I reread my post and should have phrased it better. When I was referring to the Tax man that was in regards to the folowing if you have the unfortunate circumstance of being sued, the person suing you should see that there is not a whole lot of equity available to them, esp after selling costs etc. are taken out first, so they may just go away. Although, my original question was a bit odd you still answered it. Thanks.
C2
“Is it true the more you owe the more you grow until the bank steps in?”Hi C2
In regards to the taxman deciding not to sue, and just ‘going away’ I don’t believe that he (it must be a he!) works like that.
The taxman will assess/audit you, and if they say you’ve done the wrong thing, they will impose a penalty. I do not believe that they care whether or not you have the money to pay it back, or if their penalties will send you bankrupt[xx(] (it is a government bureaucracy after all!)
They just say, pay up, and if you don’t, we’ll charge you penalties of 11 or 12% until you do. I’m not sure how long they then give you if you haven’t got it.
I hope I’ve answered your question, if not, post back.
Cheers
MelThanks Mel,
You have answered it in gemeral. Now, what would happen if after a few tax penalties had compounded and you still hadn’t paid. How would they go about getting their money, if your assests are tied up in a trust.C2
“Is it true the more you owe the more you grow until the bank steps in?”Hi C2
I think that’s where we see the beauty of trusts!![
][][}][]Basically, the Taxman says you owe me $x (or more likely $xxxx[
!])! You say – I don’t have it! You do not ‘own’ the assets in the trust, they are held for the beneficiaries (as long as you aren’t the only beneficiary). As the trustee has discretion (discretionary trust only, not unit trust) as to who gets ANY money at ANY time, you cannot count on receiving any income.If you have to go bankrupt because you cannot pay the taxman (which is something to avoid if at all possible), then for whatever period, make sure that you do not get any distributions, as part of that income can be taken by creditors during the bankrupt (non discharged) stage.
The taxman becomes just like any old creditor.
Cheers
Mel
]
]), but one way to protect ourselves if we do have some in our own name is to use the properties outside of the trust as security for those being purchased in the trust.
][
]
!])! You say – I don’t have it! You do not ‘own’ the assets in the trust, they are held for the beneficiaries (as long as you aren’t the only beneficiary). As the trustee has discretion (discretionary trust only, not unit trust) as to who gets ANY money at ANY time, you cannot count on receiving any income.The topic ‘when to setup a trust?’ is closed to new replies.
