Hi all,
Just looking at creating a trust for financial protection. I spoke to an accountant last night and he said for best protection you would have to set up a company and then have a trust set up in that company. Total cost would be about $1700 to set up $1000 for company and $700 for the trust. To all you experts out there that have trusts does this seem correct or is there a cheaper/better way to do it. Thanks Martin[biggrin][biggrin]Martin
You used the wrong term there straight away.
Cheaper is a very bad word to use in the same sentence as asset protection.
Get the best setup you can get for you and pay what it costs. You will never regret it.
Speak to a Solicitor that charges for his services not an accountant that really should know but may not.
Byronent
Adelaide SATrusts cost around about $400 wholesale and $800 for companies.
If you know what you are doing it’s quite easy to set them up.
Of course the greater evil is runnimng them the correct way.Rgds.
Lucifer_auSome people do not have a company as trustee. Having a company adds extra protection, but with added costs.
The fees quoted seem cheap for setup going through an accountant.
have a look at cleardocs.com.au where you can set your own trust up for $137. Your accountant would probably be getting the trust from a similar place to this.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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I agree the quoted fees seem good value. I paid $1750 for each, i.e. $3500 for a company and trust. That was through Ed Burton = ripoff, but he represents that his company and trust deeds include everything you need (and that many don’t), so now I have these I never need to go through him again, I would just copy the ones his company drew up and create extra ones (with the help of something like cleardocs maybe), if necessary. I am fast coming to the view that companies and trusts are a waste of time and money, anyway. Banks have a dreadful time trying to lend to the right entity in this setup and they hate it and take forever. Plus, you don’t get the tax advantages of depreciation in such a structure.
Crusier
probably half of my clients use trusts, and I rarely encounter any problems with lenders.
And trusts can claim depreciation, just like an individual. The only difference is losses cannot be distributed.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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Terry,
If a trust has no income, then there is no depreciation advantage, yeah? Whereas if I own in my own name, the depreciation makes a big difference.
I’d like to know which lenders are au fait with trusts – because Which Bank is not.Cruiser
Yes, discretionary trusts cannot distribute losses. Sounds like you should have used a Hybrid Discretionary Trust.
For full doc loans, I can’t think of a lender that will not lend to trusts.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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But even if it could distribute losses, I (as the primary income earner) am allowed to have nothing to do with the trust, therefore my income cannot get the advantage; only my partner’s much smaller income, so it still would not work.
I’m not saying Which Bank doesn’t lend to trusts. It’s just that most of their staff do not understand the first thing about doing so. So they take forever to package them.Cruiser, with a hybrid trust, you would be the unit holder and you would borrow the money so could claim the interest against you own personal income. The trust would then make a nice profit as it no longer has to pay the major expense of interest. This profit can be offset against building and fitting depreciation. The remander of the profit could then be distributed to your spouse or other low income beneficiaries.
If you have nothing to do with the trust, then you will naturally not be able to claim anything, but a loss could be carried forward to the next year to be offset against future profit. I know this is not much help now, but in a few years you will be glad you bought in a trust for sure.
Most bank staff do not understand finance, thats why they work in banks!
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | 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
Originally posted by terryw:The remander of the profit could then be distributed to your spouse or other low income beneficiaries.
By my understanding, you shouldn’t do that while there is an income-unit holder in the trust. I believe discretionally distributing the income at that time would likely disqualify the unit holder from claiming an interest deduction.
but a loss could be carried forward to the next year to be offset against future profitI think that depends on the nature of the trust and whether or not it has made a family trust election. See schedule 2F, subdivision 267-B of the 1936 tax act, the first entry of which is here:
From there you can select “Contents” at the top of the page and look at the other subdivisions there.
GP
GP,
I think Terry was talking about the discretionary trust in the second quote of his in your post. Yes, losses can be carried forward, but that doesn’t help me with affordability in the meantime.Terry, with hybrid trusts, if I am the borrower, then I/my assets are vulnerable in an asset protection sense? This was why I was advised to go the discretionary trust route.
Cruiser
Cruiser,
Originally posted by cruiser:I think Terry was talking about the discretionary trust in the second quote of his in your post.
Those trust loss provisions apply to all non-fixed trusts.
Yes, losses can be carried forwardNot according to those provisions unless certain conditions are met, which it seems to me would be impossible for a pure discretionary trust (at least as I interpret them). It looks like the only way losses could be carried forward is if the trust made a family trust election.
with hybrid trusts, if I am the borrower, then I/my assets are vulnerable in an asset protection senseI believe your personal assets are only at risk if you personally get sued, either in your own right or as trustee of the trust (discretionary or hybrid).
While I don’t think the trust assets could be touched if you personally got sued, the units you held would be part of your assets that could go to your creditors, in which case they’d become entitled to the future income from your trust.
GP
Some good points there GP.
I know GP is a HDT user and knows a lot of ins and outs, while I only have discretionary trusts.
I guess if the unit holder of the HDT is sued, then the unit is at risk. The trust assets should be ok. I don’t know what effect this would have, if for example, a person went bankrupt and his unit was seized by a bankruptcy trustee. I suppose the trustee could arrange it so not income was distributed to the unit holder.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | 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 & GP
Cruiser
Originally posted by terryw:I suppose the trustee could arrange it so not income was distributed to the unit holder.
I think the issue is more that they may be able to force the trustee to buy back the units themselves – although I’m not sure if a unit holder has that right. It may depend on the trust deed.
If the units just matched a personal loan from the bank though, then I suppose they wouldn’t really be an asset to you, since if the trust bought them back I presume the bankruptcy trustee would have to repay the bank first (although I’m just guessing how that would work).
GP
I NEED ADVICE..
I’ve have just LIQUIFIED my PPOR (cashed in, sold, offloaded, got rid of, etc..).
Well, to be accurate settlement is in 3 wks. Now Im expecting a profit running in the tens of thousands. All my years of character development, reading, learning, due diligence are starting to pay off….Thanx team.
I want to find somewhere to park this cash where no one can touch it. (I got into a punch up at work – not my fault).
Anway how can I keep my money safe from people threatening legal action against me,ie ASSAULT?? What funds or index’s are out there where I can leave this cash for 6 – 12 mnths that are pretty safe and pay 10% or more??[confused2]Loanwolf,
I’d suggest you see a lawyer very quickly. From what little I know about it, trying to protect your assets after the proverbial has hit the fan is a bit late.
GP
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