All Topics / Legal & Accounting / Want to set up Discretionary Trust

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  • Profile photo of freeman cooperfreeman cooper
    Member
    @freeman-cooper
    Join Date: 2006
    Post Count: 115

    Hi Guys,
    I am looking at setting up a Discretionary trust and was wondering if anyone can recomend anyone and how much that would cost.
    I found a place on the net called “Cleardoc” that charge $137 but it does’nt seem right.
    Can anyone help or advise?
    Regards
    Frank

    Profile photo of catacata
    Participant
    @cata
    Join Date: 2005
    Post Count: 559

    Online trusts IMOP are possible not the best way to go if you are don’t know much about trusts and the process involved. I have also heard some intresting stories about some online document providers.
    Sometimes you get what you pay for, I have seen deeds on e-bay for $37.50.

    Send me an e-mail if you want to chat.

    CATA
    Asset Protection Specialist
    [email protected]

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Why doesn’t it seem right?

    I have clients who have used the Cleardocs trust deed. It is nice and cheap and appears to be OK, but as Cata mentioned, you could mess things up or get into trouble if you don’t know how to set them up.

    eg. a client of mine made his son Settlor. This means his son can never be a beneficiary of his trust – not an ideal situation!

    Terryw
    Discover Home Loans
    Parramatta
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    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of HousemenderHousemender
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    @housemender
    Join Date: 2006
    Post Count: 62

    I’ve just used Cleardocs – it worked for me, but agree you have to have a good idea what you’re doing.

    Profile photo of freeman cooperfreeman cooper
    Member
    @freeman-cooper
    Join Date: 2006
    Post Count: 115

    Hey thanks you guys for your replies.
    Can you please let me know what some of the things are to look out for or be prepared for?

    Regards
    Frank

    Profile photo of islandgirlislandgirl
    Member
    @islandgirl
    Join Date: 2006
    Post Count: 55

    I guess I am in the same boat as you Frank. Thanks for asking the question. I was discussing options such as discretionary trusts with my accountant only yesterday and the answers I got were so wishy washy that I am really none the wiser. I’ve got some books coming from the library to help the education process “How to legally reduce your tax” was one I heard was quite good

    Cata I think I will send you an email for some more info.

    Frank – good luck with your fact finding.

    cheers

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    There are many things to consider, eg how many trustees? I see a lot with husband and wife as trustees, but I don’t think this is a good idea if you are investing in property as it can lead to each giving a guarrantee. This creates more risk and decreases borrowing capacity.

    There is also the ability to name beneficiaries. But why name someone if they will be included anyway as a general beneficiary? Some lenders want guarrantees from all adult people named in the trust deed.

    In some cases it is better for a company to be trustee. It is safer from an asset protection POV and also easier if you want to change directors and hence change the guarrantor for the next loans etc.

    Sometimes when dealing with solicitors or accoutants, they do not realise the lending issues.

    I had an argument with a clients solicitor a while back. The client was trying to buy a property and hide it from his ex spouse. The solicitor suggested he set up a trust with a friend as trustee. They did that, but they did not think about who would guarrantee the loan. The mate didn’t want to do it. The soliticor just told me to tell the lender the client would guarrantee the loan, even though he was not mentioned in the trust. He didn’t realise that no lender would accept this and lend money this way.

    Terryw
    Discover Home Loans
    Parramatta
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    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of catacata
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    @cata
    Join Date: 2005
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    Originally posted by Terryw:

    There is also the ability to name beneficiaries. But why name someone if they will be included anyway as a general beneficiary? Some lenders want guarrantees from all adult people named in the trust deed.

    It can also be an advantage if you can add/remove beneficiaries with a minute entry. This allows you to borrow money with only one beneficiary and then add more if wanted by the trustee.

    [/quote]
    In some cases it is better for a company to be trustee. It is safer from an asset protection POV and also easier if you want to change directors and hence change the guarrantor for the next loans etc.

    [/quote]
    Agree completley
    [/quote]

    Sometimes when dealing with solicitors or accoutants, they do not realise the lending issues.
    [/quote]

    Unfortunatly this is possibly the bigest issue. Not everyone takes into consideration all the aspects of the trust, and there are alot of areas to think about. This comes back to my point about online structures and the lack of knowledge in this area. You can save a bit not and pay in the long run.

    CATA
    Asset Protection Specialist
    [email protected]

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
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    And for all those DIY Trustees out there, if you are going to add or remove beneficiaries this can be extremely dangerous to your wealth.

    In many instances this can cause a resettlement of the trust. If this happens then it is the same as winding up the old trust and creating a new trust. And all the costs of stamp duty and CGT for transfering assets would be incurred.

    For more on Resettlements, look at this paper:
    http://www.taxlawyers.com.au/Publications/trustacc2.doc

    For a very good and easy to understand account of the various roles in a discretionary trust see:
    http://www.taxlawyers.com.au/Publications/New/Trustacc1.htm

    Terryw
    Discover Home Loans
    Parramatta
    [email protected]
    Sign up to my mailing list.
    Just send me a blank email, with “subscribe” in subject line.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of catacata
    Participant
    @cata
    Join Date: 2005
    Post Count: 559

    Tha Addition or removal of beneficiaries to a trust and how it is done will depend on the wording of the trust deed.

    In most cases it will cause resettlement, a rather costly exercise. Other deeds allow this with a simple minute entry, which I can supply a template to my clients. Quick and easy and much more flexible this way.

    Keep in mind the wording of any document can change it, and the way the wording is read is also questionable.

    CATA
    Asset Protection Specialist
    [email protected]

    Profile photo of LeilaLeila
    Member
    @leila
    Join Date: 2004
    Post Count: 63

    Frank,
    My husband and I set up our trust a couple of years ago and did a lot of research beforehand, but still had questions.

    We made the decision to go to our lawyers and speak to a specialist in setting up trusts to ensure that the set-up we chose could meet our long-term investment requirements. All up I believe we paid about $1800 for the advice, the trust deed and setting up a trustee co.

    It was well worth it for the information received and the peace of mind in knowing it was done right. If we ever need to create another Trust, we would now be able to do it confidently using one of the cheaper methods mentioned in the previous posts.

    Good luck!
    Leila
    [biggrin]

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