All Topics / Help Needed! / Trust Structure for buying property

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  • Profile photo of Hux001Hux001
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    @hux001
    Join Date: 2003
    Post Count: 108

    Hi All,

    I’m about to do the right thing and set up a trust for all future property purchases. I (think) Steve & co suggest a company on top of a trust for protection, but my accountant is yet to be convinced that a company is needed as well as a trust. Has anyone here been ‘saved’ from litigation etc by having a company set up over their trust?

    Profile photo of AceyduceyAceyducey
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    @aceyducey
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    Post Count: 651

    Hux001,

    I haven’t been saved from litigation by my corporate Trustee as yet Hux…but you can’t put the company in place AFTER you get sued can you :)

    Personally I like the extra degree of separation provided by a corporate trustee. It makes life much easier!

    Also bear in mind that a corporation is a limited liability entity, versus you, a human, being an unlimited liability entity.

    Cheers,

    Aceyducey

    Profile photo of Hux001Hux001
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    @hux001
    Join Date: 2003
    Post Count: 108

    I know what your saying however I wanted to check on the likelyhood and histoy of someone being sued and risking all their assets. I haven’t been able to find any cases of it and have some reservation about the worth of it.

    It’s somewhat bread&butter for many accountants and I wonder if this is the reason some recommend it.

    Profile photo of HHHHHH
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    @hhh
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    ok, you are sitting in your rocking chair on the porch with your life partner. You can either be happy and rich knowing you possibly spent $1000 that was not needed, or do you want to be in poverty wondering how rich you might be if it weren’t for that 1 in 10000 lawsuit?

    I know that second thought is something I would pay a lot more than $1000 to avoid!

    HHH

    Profile photo of AceyduceyAceyducey
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    @aceyducey
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    Look at it this way.

    Why bother insuring your investment properties against fire/flood/etc…after all a very small minority of houses actually get damaged each year…yours probably never have.

    So why buy insurance?

    The term is risk mitigation….you take certain actions to reduce the risk of certain events.

    Sure your accountant may feel that there’s little change of you being sued….but will they pay for the court case and compensation if you are?

    Heck while on the topic – I’ve never had a serious car accident, let’s take all the seatbelts out, they’re inconvenient anyway! [biggrin]

    Cheers,

    Aceyducey

    Profile photo of Griffo77Griffo77
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    @griffo77
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    G’day all,

    I investigated using companies and trusts when investing in property. You need to balance the possible benefits of asset protection against missing out on some tax advantages; eg not being able to claim as much depreciation against your trust’s income as you would against your income, if you buy new or near new property.

    You need to be aware that there may be costs involved in transferring a property from your name to a trust at a later stage if in the future you decide you want the protection of a trust.

    Cheers

    Griffo77

    Profile photo of TerrywTerryw
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    @terryw
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    I do not use a corporate trustee on any of my trusts. But everyone is different, so better to get some professional advice.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of House HunterHouse Hunter
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    @house-hunter
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    Hi Hux,

    Ok this is just the way that we have been shown. You first set up your company that holds no assets. this then becomes trustee for your family trust.

    With a trust, the trustee can be changes at any time, so if there is any problems you are able to appoint another company as trustee to the trust and the litigation will be against the original company that holds no assets.

    You cannot sue a trust, only a trustee, therefore you are able to control the assets however you are not responsible for any problems caused by assets of the trust.

    I hope this helps, let us know if you have any other questions

    Hunter House Hunters.
    Specialising in finding your dream home in Newcastle and the Hunter Valley or your perfect investment property throughout Australia. [email protected]

    Profile photo of Hux001Hux001
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    @hux001
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    Thanks House Hunter, I think you are spot on.

    Profile photo of VaslavVaslav
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    @vaslav
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    House Hunter is right, the main point is you have to be the appointor who controls what happens in the trust..

    Profile photo of AceyduceyAceyducey
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    @aceyducey
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    Post Count: 651

    Motivstorm,

    The appointer only appoints the first Trustee – who then controls what happens in the Trust. So it’s not that important. We tend to not be the appointer in our vehicles.

    As for the ability to change Trustees & no claim be made on the new Trustee & trust, well that’s actually not quite true – there are some good threads on Somersoft about it (do we have any Trust legal experts here who can comment about it in depth?).

    However it’s not entirely about removing risk – it’s about minimising it to acceptable levels.

    If an acceptable level for you is to be the trustee yourself – go for it!

    Cheers,

    Aceyducey

    Profile photo of melbearmelbear
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    @melbear
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    Originally posted by Aceyducey:
    The appointer only appoints the first Trustee – who then controls what happens in the Trust. So it’s not that important. We tend to not be the appointer in our vehicles.

    Acey

    Everything I have read contradicts this comment.

    Quoting Dale GG in Trust Magic, p26 (available from http://www.gatherumgoss.com):

    The APPOINTOR
    This is the most powerful person within a trust structure. The Appointor’s role is to appoint and ‘sack’ the trustee of the trust. Therefore, it is important that you control the trust by being involved as the Appointor.

    For example, let’s say that you have a trust that owns $10 million worth of property. If your accountant is the Appointor, he/she can sack you as the trustee and take control of the assets of the trust by appointing their own company as the new trustee. This could lead to you losing all of your wealth through a very carelessly created trust.

    Be careful and do not allow anyone else to have the final control of your assets.

    Cheers
    Mel

    Profile photo of VaslavVaslav
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    @vaslav
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    Acey,

    That’s what i read in Dale’s book. i still think i will follow MelBear quote from Dale’s book. i still think the appointor is the most powerful person as he can hire and sack whichever trustee to control the investment. Sure, once appointed, that trustee is the one who’s managing it, like the CEO of the trust so to speak, but what if the appointor, who if it’s not u sack u (who’s the trustee) and apppoints someone else in ur place? wouldn’t that be dangerous since as appointor, it is the appointor’s prerogative(is that the correct spelling?) to do so.

    There’s no Such thing as No Can’t Do!!!!!

    Profile photo of JulianJulian
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    @julian
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    Post Count: 232
    Originally posted by Motivstorm:

    Acey,

    That’s what i read in Dale’s book. i still think i will follow MelBear quote from Dale’s book. i still think the appointor is the most powerful person as he can hire and sack whichever trustee to control the investment. Sure, once appointed, that trustee is the one who’s managing it, like the CEO of the trust so to speak, but what if the appointor, who if it’s not u sack u (who’s the trustee) and apppoints someone else in ur place? wouldn’t that be dangerous since as appointor, it is the appointor’s prerogative(is that the correct spelling?) to do so.

    There’s no Such thing as No Can’t Do!!!!!

    If the appointor is gone before the trusee (ie a individula trustee) , who will take the new post of appointor ?

    Julian

    THERE IS ALWAYS A BETTER WAY!

    Profile photo of TerrywTerryw
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    @terryw
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    Julian

    You can have back up appointers, both named and generic. eg if husband is appointer, then the wife can be backup appointer. Then if required, the children of the husband and/or wife etc.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Hux001Hux001
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    @hux001
    Join Date: 2003
    Post Count: 108

    Wow now I am confused !

    Actually just started a trust with my wife and I as trustees, kids and grandkids etc as benefitionaries (spelling?)…thanks for the replies.

    Hux001

    Profile photo of AceyduceyAceyducey
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    @aceyducey
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    Post Count: 651

    Yup Mel I made a mistake – that’s what happens when I scan too quickly ;)

    Cheers,

    Aceyducey

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