All Topics / Help Needed! / Formation of trust

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  • Profile photo of iamjoemoniamjoemon
    Participant
    @iamjoemon
    Join Date: 2010
    Post Count: 11

    Hi,
    I would like to know how much it will cost to create a trust? And also the maintenance charges.
    Can a third party join in the trust account other than spouse?
    I have an interested party in US to be part of my trust.

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

    A is an arrangement where A owns something for B. A parent opening a bank account for a child for example. Cost nil.

    If you want a more complex trust, then you will need a deed. Deeds can cost from about $100 up to $10,000 depending on the type of the deed and the person drafting it.

    In many States there is stamp duty payable on the deed. In NSW this is about $550, depending on the inital settled sum.

    If you want a company as trustee, then you will need to pay the company set up costs and the ASIC fee of $400. There is an annual ASIC fee of $212 as well.

    Companies and trusts will need tax returns, accountants fees usually depend on how complex it is – the more properties the more costs invovled (but you will pay this anyway with owning in your own names).

    By 'join' do you mean beneficiary? if so anyone can be a beneficiary, even people who don't exist yet – future grandchildren etc. To be a beneficiary they have to be named, or fall into a class – such as grandchild.

    Foreigners can be beneficaries – but there are tax implications. Certain incomes have withholding taxes which vary depending on the type of income (royalties, dividends etc), and the recipient may also have to pay tax in their home countries as well

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

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

    Profile photo of trusteetrustee
    Member
    @trustee
    Join Date: 2010
    Post Count: 27

    hi, you don't say why you are looking for a trust so I will reply to your initial query.  It would probably cost around $2500- $3000 to set up a trust structure.  Whether it is a unit, hybrid or discretionary or some other.   THe purpose may dictate costs down the track but as a simple and genral guide a tax return might cost you between $800 and $1000.

    hope this helps

    Profile photo of ScratchScratch
    Member
    @scratch
    Join Date: 2010
    Post Count: 81

    I just set up a discretionary trust for investment purposes through a conversation with my Accountant and Solicitor, cost me $385.

    cheers

    Shane

    Profile photo of number 8number 8
    Participant
    @number-8
    Join Date: 2010
    Post Count: 333

    Check out the prices on http://www.trustdeed.com.au

    You will find they are not the expense described above. Further, I have read through these deeds and they are reputable.

    http://www.birchcorp.com.au

    Profile photo of iamjoemoniamjoemon
    Participant
    @iamjoemon
    Join Date: 2010
    Post Count: 11

    Thanks all for the quick reply.http://www.trustdeed.com.au looks like the cheapest option. Family Discretionary Trusts -$110.I'm planning to buy positively geared investment property.
    My purpose is to create a Trust with beneficiaries as my wife and a friend.So I'm still not clear which trust I need to create(unit,fixed or decretionary).The whole purpose of creation of trust is tax minimisation as my wife is not working.So I would like to create a cheap and simple one.

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

    you could get yourself into all sorts of trouble by doing it yourself.
    Do you understand all the roles of those in the trust? What the effect of naming someone makes?

    The consequences of getting it wrong can be extremely costly. 

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

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

    Profile photo of mrs pmrs p
    Member
    @mrs-p
    Join Date: 2006
    Post Count: 18

    Terry
    Can you tell us what form of structure you would set up for your average wage earner investing in residential property and development?  What downfalls have you heard of with some trusts-there are lots of negative comments around regarding Chan and Naylor PITs.  And in your experience do the main banks lend to this form of Trust?  Cheers for your insight, mrs p

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

    I would stay clear of hybrid trusts. Look at discretionary trusts as these offer the greatest asset protection and great tax flexibilities. Just be aware of the drawbacks – losses cannot offset personal income and probably more land tax would be payable.

    Banks generally don't like hybrid trusts, especially where the borrower is not the legal owner of the property. eg company as trustee with mrs P as borrower.

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

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

    Profile photo of ScratchScratch
    Member
    @scratch
    Join Date: 2010
    Post Count: 81

    I will have to agree with Terry here, it seems as though it is not only the banks who are not overly happy with the Hybrid Trust structure at present, after a discussion with my accountant last week she advised me that the ATO were becoming increasingly aware of their use.

    Discretionary Trust is my recommendation also.

    cheers

    Shane

    Profile photo of trusteetrustee
    Member
    @trustee
    Join Date: 2010
    Post Count: 27

    Hi Number8,

    The cost I was referring to was through an accountant and with the setting up of a company as trustee with ABN and TFN.  No doubt there are addtional costs for the accountants services.   I am told that not all trust deeds are the same and not all well written.  What can you tell us about the trust deeds from this site.  I am reluctant to buy something like this over the internet.

    thanks

    Profile photo of number 8number 8
    Participant
    @number-8
    Join Date: 2010
    Post Count: 333

    I have one of the SMSF trust deeds in my office. This company has been around for a long time and the deeds have been vet by many banks and accountants alike. To say any deed is a sure thing would be suicide, but from all accounts this firm has been and will be around for the long term.

    Further, The owner is also very giving of his time. I have talked to him on several occasions.

    I should receive royalties for this plug….

    http://www.birchcorp.com.au

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

    The deed may be good, but do you know how to use it? who to put in what roles etc

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

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

    Profile photo of Adrian13Adrian13
    Participant
    @adrian13
    Join Date: 2010
    Post Count: 2

    Hi Terry,

    If I set up a trust ahow does the $2 company come into it.
    Is it the following:

    1. Trust
    2. Company – Trustee
    3. Directors of the company the beneficiaries

    ???

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    Adrian13 wrote:

    Hi Terry,

    If I set up a trust ahow does the $2 company come into it.
    Is it the following:

    1. Trust
    2. Company – Trustee
    3. Directors of the company the beneficiaries

    ???

    It could be the trustee or a beneficiary. The directors can also be separate beneficiaries.

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

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

    Profile photo of Adrian13Adrian13
    Participant
    @adrian13
    Join Date: 2010
    Post Count: 2
    Terryw wrote:
    Adrian13 wrote:

    Hi Terry,

    If I set up a trust ahow does the $2 company come into it.
    Is it the following:

    1. Trust
    2. Company – Trustee
    3. Directors of the company the beneficiaries

    ???

    It could be the trustee or a beneficiary. The directors can also be separate beneficiaries.

    If the directors are seperate beneficiaries are they paying company tax before funds are dispusred?

    What is the most tax effiecient set up.

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

    If directors of a company receive a distribution from the trust then it has nothing to do with the company. That is a separate position they hold. They will pay tax on their marginal rates. If the trustee distributes to the company, then it still doesn't concern them as individuals. The company will pay tax at its marginal rate or pay a pre-tax dividend.

    The most efficient tax set up will entirely depend on the incomes of the people involved in the running of the trust and their families. It works out best, tax wise, to distribute to the lowest income earners first – or actually those adults with the lowest taxable incomes.
    Kids can receive around $3,000 pa without paying tax and adults can receive about $15,000.

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

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

    Profile photo of trusteetrustee
    Member
    @trustee
    Join Date: 2010
    Post Count: 27

    I think Terryw points are very valid.  How would you know that the trust is tailored to fit your circumstances.  Also stamp duty and registration would need to be paid in each state.  There is more to it than meets the eye.  I haven't had a good look at the sight and I believe your trust may be setup legally but how do you know that it fits your situation and who provides the understanding of how it operates.  The trustee….being yourself I imagine would have to be quite up with the duties and responsibilities of a SMSF.  Who provides this technical knowledge and updates and what cost does that come at ?

    Thanks

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

    I think the original post is about setting up a trust – I assumed a discretionary trust. If it is a SMSF trust then it is even more complicated and more important to get advice.

    The deed is only one aspect of the trust. It is how it is set up that is important. eg.there are cases where someone bought a property as trustee for a trust and then they were charged stamp duty twice because the trust wasn't settled properly before hand. That would be a very costly mistake. What about if you put a family member as settlor – then later find out that that person can never receive a benefit from the trust – I have seen one of my old clients with his trust set up this way. Or you name uncle X as beneficiary and then can't get finance because he refuses to give the bank a personal guarantee and the bank won't lend without it. Taking off would probably result in a resettlement with full CGT and stamp duty payable on all the trust assets.

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

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

    Profile photo of mrs pmrs p
    Member
    @mrs-p
    Join Date: 2006
    Post Count: 18

    Just regarding the Discretionary Trust- if losses through neg geared properties are trapped in the trust what other options are there for investors in this situation? 
    mrs p

Viewing 20 posts - 1 through 20 (of 30 total)

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