All Topics / Legal & Accounting / Mother retireing this year with property she wants to biuld townhouses/villas on. Looking at a structure to hold assets

Viewing 20 posts - 1 through 20 (of 22 total)
  • Profile photo of GatewayGateway
    Participant
    @gateway
    Join Date: 2011
    Post Count: 12

    Hello

    I am hoping to obtain advice for my mother.

    She is 65 this year and wants to retire. She has a few undeveloped rental properties which are low yield and have old fibro or wooden houses on them which are quite old.  She wants to build townhouses/villas on all or some of these and live off the rent.

    We want to know if/when and how the best way to set up a structure to handle all of this with the following in mind.

    1. Tax – we want to pay as little as legally possible.
    2  Asset protection – she is sued……..or we (my brother and I ) are sued……or later on….one of us divorces and there is a family law dispute.
    3. Succession  –  is it possible for her to leave it for my brother and I without being directly to us in case of being sued/divorced etc.

    Given that there are multiple properties involved and our very limited experience, what is the best way to go?

    Paul

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

    Everyone wants to pay as little tax as possible and the best way to minimise income tax is to use a flexible structure such as a discretionary trust. Any other structure is inflexible.

    Discretionary trusts offer the greatest asset protection too.

    But the problem for your mum is that she already owns the property. Transferring means paying stamp duty and losing the asset protection advantages of a discretionary trust (initially anyway). For family law disputes there is no structure that is safe. For succession disputes using a trust can assist as assets held by a trust do not form part of the estate (but could under family provision claims in some states such as NSW).

    Since she is at retirement age there is also superannuation to consider. ie a SMSF. Super does not form part of the estate generally either.

    A good way to hold assets such as property would be via a unit trust with the units owned by a discretionary trust. This makes things very flexible as the units can be easily transferred without changing ownership and it may be possible to transfer the units (and therefore the house) to a SMSF without stamp duty later on.

    Finance is another issue – will she be developing with cash or borrowing from a bank? It may be hard to borrow if she is retiring.

    If the properties are held by your mum personally then she can set up one or more discretionary trusts in her will, ie testamentary trusts and leave assets to a trust which you control. Your sister could have the same trust or a separate.

    There are a huge number of issues to consider and you will need detailed advice which will be expensive.

    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 colinnewlandcolinnewland
    Participant
    @colinnewland
    Join Date: 2006
    Post Count: 128

    Speakto a finance broker who specialises in 'commercial' property development. There are waysto get around the lack of future income (other than the property income itself).Depending on the equity held in property, she should qualify for a development loan as they banks will do a valuation on the end value.

    Another way to deal with it is to go into partnership with a reputable builder where she provides the land and they provide the materials and labour and finance.
    She talks a % of the profit by way of retaining several of the finished developments (as will the builder, who may or may not sell them to get to his profit).
    This is a good method as it take sthe stress out of getting a LARGE loan with the builder completing ALL the paperwork AND you get to retain ownership of the land until the final sale to an end buyer.
    You will provide him with several options (one covering each unit to be passed on) to buy (at a pre determined price) and a licence to enter the property for the purpose of completing the building development. As you are not (yet) selling the units, the builder will not be required to pay stamp duty. Stamp duty is paid by the final buyer who takes the option to purchase from th builder. This prevents double payment of stamp duty and retains the builders cashflow.

    You will need sound legal and financial advice to use this method buy well worth it in the end.

    Profile photo of Scott No MatesScott No Mates
    Participant
    @scott-no-mates
    Join Date: 2005
    Post Count: 3,856

    Also your mother may lose any cgt exemption if they are a pre-87 asset.

    There is no simple answer but to seek specialist advice once you know what you want to do.

    Profile photo of GatewayGateway
    Participant
    @gateway
    Join Date: 2011
    Post Count: 12

    TerryW
    Thanks for taking  the time to answer this post.  If it ok can I ask you a couple of questions about your suggested framework.

    1.  How will the discretionary trust minimise tax for my mother? I don't really understand this.
    2.  She will have to pay to tranfer the property, so best to do this before development starts,,,,but can you tell me how this will ""(initially at least)"" affect asset protection .
    3. The SMSF  this a better way to go for her?
    4. She has 400 plus in cash so won't have to borrow a great deal for the initial 3 vill/townhouse development.

    Terry I know someone who explained to me a little of having a company and the assets owned by a trust so that the assets are protected and 'many' more deductions become available (whatever they are I don't know).
    But I do not understand how any of this will balance out ie LAND TAX, does a trust////company get the land tax threshold as well?

    ColinNewland
    Thanks for taking the time with this. Please see further questions/comments in relation to your suggestions.

    1. She has another large(1acre) block siutable I guess for a joint development and this might be ok to share with a biukder later on when we know what we are doing…but for now we need to sort out the best ownership and asset holding structure with, taxation (personal and land tax and other tax if any) ,, asset protection and succession to sort out.

    ScottNoMates….thanks for your comments

    1. It's all Capital Gains Tax free as
    purchased before 87..

    Paul
    Re

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    Gateway wrote:
    TerryW
    Thanks for taking  the time to answer this post.  If it ok can I ask you a couple of questions about your suggested framework.

    1.  How will the discretionary trust minimise tax for my mother? I don't really understand this.
    2.  She will have to pay to tranfer the property, so best to do this before development starts,,,,but can you tell me how this will ""(initially at least)"" affect asset protection .
    3. The SMSF  this a better way to go for her?
    4. She has 400 plus in cash so won't have to borrow a great deal for the initial 3 vill/townhouse development.

    Terry I know someone who explained to me a little of having a company and the assets owned by a trust so that the assets are protected and 'many' more deductions become available (whatever they are I don't know).
    But I do not understand how any of this will balance out ie LAND TAX, does a trust////company get the land tax threshold as well?

    Paul

    1. Discretionary trusts enable the trustee to distribute the income of the trust to a wide range of beneficiaries. This is usually done with tax in mind so that someome with a low income will get more than someone with a higher income. If everyone is on a highish income then it is possible to distribute to a company and cap the rate at 30%. The best thing is that the trust is discretionary so the trustee can vary the amounts each year.

    2. With discretionary trusts no one beneficiary has any fixed interest. So if a beneficiairy were to go bankrupt the trustee in bankruptcy could step into their shoes, but they would have no rights over the trust assets and only the right to be considered for a distribution from the trust. The trustee would not normally distribute to the bankruptcy trustee but to other family members in stead.

    But, if someone transfers property to a trust (or anyone actually) then these transactions can be undone under many circumstances. If the reason for the transfer was to defeat creditors (ie asset protection!) then the transfer can be unwound indefinitely. If it was done with a sale for market value then the period may be 5 years.

    3. SMSF have considerable advantages. Great asset protection and when in the pension phase tax free income and CGs. Developing may be difficult thought.

    In NSW there is not land tax free threshold for companies or trusts so 1.6% on $1 and up in land value. But with that many properties she would probably have used up her land tax free threshold anyway.

    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 GatewayGateway
    Participant
    @gateway
    Join Date: 2011
    Post Count: 12
    Terryw wrote:
    Gateway wrote:
    TerryW
    Thanks for taking  the time to answer this post.  If it ok can I ask you a couple of questions about your suggested framework.

    1.  How will the discretionary trust minimise tax for my mother? I don't really understand this.
    2.  She will have to pay to tranfer the property, so best to do this before development starts,,,,but can you tell me how this will ""(initially at least)"" affect asset protection .
    3. The SMSF  this a better way to go for her?
    4. She has 400 plus in cash so won't have to borrow a great deal for the initial 3 vill/townhouse development.

    Terry I know someone who explained to me a little of having a company and the assets owned by a trust so that the assets are protected and 'many' more deductions become available (whatever they are I don't know).
    But I do not understand how any of this will balance out ie LAND TAX, does a trust////company get the land tax threshold as well?

    Paul

    1. Discretionary trusts enable the trustee to distribute the income of the trust to a wide range of beneficiaries. This is usually done with tax in mind so that someome with a low income will get more than someone with a higher income. If everyone is on a highish income then it is possible to distribute to a company and cap the rate at 30%. The best thing is that the trust is discretionary so the trustee can vary the amounts each year.

    2. With discretionary trusts no one beneficiary has any fixed interest. So if a beneficiairy were to go bankrupt the trustee in bankruptcy could step into their shoes, but they would have no rights over the trust assets and only the right to be considered for a distribution from the trust. The trustee would not normally distribute to the bankruptcy trustee but to other family members in stead.

    But, if someone transfers property to a trust (or anyone actually) then these transactions can be undone under many circumstances. If the reason for the transfer was to defeat creditors (ie asset protection!) then the transfer can be unwound indefinitely. If it was done with a sale for market value then the period may be 5 years.

    3. SMSF have considerable advantages. Great asset protection and when in the pension phase tax free income and CGs. Developing may be difficult thought.

    In NSW there is not land tax free threshold for companies or trusts so 1.6% on $1 and up in land value. But with that many properties she would probably have used up her land tax free threshold anyway.

    He TerryW

    From what I see she would have to "sell" the property to the trust…….how is this done as it will be a new trust with no assets?

    Also…..when renting to tenants.  Will mum be able to sign the lease and rent to them in her name or will she have to use the trust? If she uses the trust and the tenant sues….will the tenant be sueing the trust ,,, if what are the liabilities?

    Maintenance paperwork each year for a trust (I just looked at the tax office website) appears to be as if filing a return for an individual…….so is it the case that the Unit trust (the one the property name is in) will be out taxes,rates and insurance and the Discretionary trust will be paid from the income of the unity trust?

    Thankyou TerryW

    Paul

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

    Hi Paul

    Yes, the properties would need to be transferred to the trustee of the trust. Stamp duty and CGT would be payable at market rates.

    If the trust needs to get a loan to buy the properties then the lenders will require personal guarantees from all trustees and/or directors of the trustee company (and maybe shareholders if these are different). The incomes and liabilities of the individual and the rent from the properties is taken into account.

    Its a big move to do this so you need proper and careful advice.

    The trust is not a legal entity, but the trustee that is the legal owner of property. So the trustee enters into agreements with tenants and other contracts.

    If the tenant sues then the tenant will be suing the legal owner which will be the trustee in its capacity as trustee. The trust deeds will have clauses indemnifiying the trustee out of the assets of the trust. This means the trustee will be liable to pay, but will be reimbursed out of the trust's assets. If the trust doesn't have enough assets then the trustee's personal assets can be at risk. This is why it is a good idea to use a Pty Ltd company as trustee as a company is a separate legal person and generally the directors are not liable unless they do something illegal. Shareholders can't be held liable for company debts. If the trustee is not indemnified out of the trust assets then the directors of the trustee company can be held to be personally liable in some instances under the Corporations Act, s197 from memory.

    A trust will need to do a separate tax return and if you have a company then ASIC annual returns and fees too.

    So, if a company as trustee for a unit trust owns the property then the company will be the one contracting. It won't have any income and so must lodge a nil tax return and ASIC statements every year. The unit trust is the owner for tax purposes and this trust receives the income and claims the expenses. The units of the unit trust can be owned by your discretionary trust and any income from the unit trust can be distributed to the discretionary trust and from there to the lowest income earners in the family group.

    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 GatewayGateway
    Participant
    @gateway
    Join Date: 2011
    Post Count: 12
    Terryw wrote:
    Hi Paul

    Yes, the properties would need to be transferred to the trustee of the trust. Stamp duty and CGT would be payable at market rates.

    If the trust needs to get a loan to buy the properties then the lenders will require personal guarantees from all trustees and/or directors of the trustee company (and maybe shareholders if these are different). The incomes and liabilities of the individual and the rent from the properties is taken into account.

    Its a big move to do this so you need proper and careful advice.

    The trust is not a legal entity, but the trustee that is the legal owner of property. So the trustee enters into agreements with tenants and other contracts.

    If the tenant sues then the tenant will be suing the legal owner which will be the trustee in its capacity as trustee. The trust deeds will have clauses indemnifiying the trustee out of the assets of the trust. This means the trustee will be liable to pay, but will be reimbursed out of the trust's assets. If the trust doesn't have enough assets then the trustee's personal assets can be at risk. This is why it is a good idea to use a Pty Ltd company as trustee as a company is a separate legal person and generally the directors are not liable unless they do something illegal. Shareholders can't be held liable for company debts. If the trustee is not indemnified out of the trust assets then the directors of the trustee company can be held to be personally liable in some instances under the Corporations Act, s197 from memory.

    A trust will need to do a separate tax return and if you have a company then ASIC annual returns and fees too.

    So, if a company as trustee for a unit trust owns the property then the company will be the one contracting. It won't have any income and so must lodge a nil tax return and ASIC statements every year. The unit trust is the owner for tax purposes and this trust receives the income and claims the expenses. The units of the unit trust can be owned by your discretionary trust and any income from the unit trust can be distributed to the discretionary trust and from there to the lowest income earners in the family group.

    Hi TerryW

    So if she goes with this structure and she is sued……the company as trustee goes bankrupt and we form a new company to act as trustee…..so none of the assets are at risk….is that correct?

    From what I can see if we go this way she would have to set up a Pty Ltd Company/Unit Trust structure (to protect the assets) and a Discretionary Trust to Disribute the rents (with the possibility of there being another company so the rents would only be taxed at 30%).

    Is this what you are getting at?   If so, how much administration goes into this? Do you know anyone who runs a setup like this for rental properties…..and how much they have to pay their accountant to run 2 trusts and 2 companies.

    I certainly appreciate your advice, if I am understanding it the wrong way please correct me

    Paul

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    Gateway wrote:
    Terryw wrote:
    Hi Paul

    Yes, the properties would need to be transferred to the trustee of the trust. Stamp duty and CGT would be payable at market rates.

    If the trust needs to get a loan to buy the properties then the lenders will require personal guarantees from all trustees and/or directors of the trustee company (and maybe shareholders if these are different). The incomes and liabilities of the individual and the rent from the properties is taken into account.

    Its a big move to do this so you need proper and careful advice.

    The trust is not a legal entity, but the trustee that is the legal owner of property. So the trustee enters into agreements with tenants and other contracts.

    If the tenant sues then the tenant will be suing the legal owner which will be the trustee in its capacity as trustee. The trust deeds will have clauses indemnifiying the trustee out of the assets of the trust. This means the trustee will be liable to pay, but will be reimbursed out of the trust's assets. If the trust doesn't have enough assets then the trustee's personal assets can be at risk. This is why it is a good idea to use a Pty Ltd company as trustee as a company is a separate legal person and generally the directors are not liable unless they do something illegal. Shareholders can't be held liable for company debts. If the trustee is not indemnified out of the trust assets then the directors of the trustee company can be held to be personally liable in some instances under the Corporations Act, s197 from memory.

    A trust will need to do a separate tax return and if you have a company then ASIC annual returns and fees too.

    So, if a company as trustee for a unit trust owns the property then the company will be the one contracting. It won't have any income and so must lodge a nil tax return and ASIC statements every year. The unit trust is the owner for tax purposes and this trust receives the income and claims the expenses. The units of the unit trust can be owned by your discretionary trust and any income from the unit trust can be distributed to the discretionary trust and from there to the lowest income earners in the family group.

    Hi TerryW

    So if she goes with this structure and she is sued……the company as trustee goes bankrupt and we form a new company to act as trustee…..so none of the assets are at risk….is that correct?

    No. If she is sued then the trust is a separate entity and is not directly effected. Creditors could get their hands on anything she owns including shares and units and thereby control the company and/or trust. But the appointor could sack the trustee and appoint a new one easily. With the units if these were held by a discretionary trust they they would generally not be available to creditors.

    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 TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    Gateway wrote:
    Terryw wrote:
     
    From what I can see if we go this way she would have to set up a Pty Ltd Company/Unit Trust structure (to protect the assets) and a Discretionary Trust to Disribute the rents (with the possibility of there being another company so the rents would only be taxed at 30%).

    Is this what you are getting at?   If so, how much administration goes into this? Do you know anyone who runs a setup like this for rental properties…..and how much they have to pay their accountant to run 2 trusts and 2 companies.

    I certainly appreciate your advice, if I am understanding it the wrong way please correct me

    Paul

    The company as trustee will assist in protecting the individual if the owner of the house is sued for some reason. Not 100% protection but very good protection because of the limited liability of companies.

    The company also adds flexibility and helps distinguish the trust property from the personal property.

    Using the unit trust won't add any protection but adds flexibility as you can transfer part ownership of the property by transferring units. No need to change the name on title. It may also be possible to transfer the units into a SMSF with no stamp duty as well.

    The discretionary trust is used to own the units for asset protection and for tax flexibility.

    You should also consider loans before setting this up. Make sure the lender is happy to lend to a company as trustee of a unit trust. It might be a bit difficult if residential but more easier if a commercial loan.

    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 GatewayGateway
    Participant
    @gateway
    Join Date: 2011
    Post Count: 12

    ok TerryW

    Time to see someone about this.

    Can you make a recommendation?

    Paul

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

    Paul,

    Where are you located?

    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 GatewayGateway
    Participant
    @gateway
    Join Date: 2011
    Post Count: 12

    Hi TerryW

    I am in the St George area.

    Paul

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

    in Sydney?

    for the tax side see http://www.strategicwealth.com.au/

    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 GatewayGateway
    Participant
    @gateway
    Join Date: 2011
    Post Count: 12

    Thanks TerryW

    So, my summary understanding of this thread is that.

    Trusts are good……but having a Pty Ltd Co as a trustee does not offer any protection for an average person that that person being the trustee; as a tenant can still sue the PTY LTD Co as easily a the average working person.

    The trust itself offers protection only if the average working  person is sued by a party in daily life not connected to the rental properties. The trust property will be safe.

    A Unit Trust is good to hold the properties and a Discretionary Trust is good to disperse the funds.

    A big CON with Pty Ltd Co's and trusts is the running cost so keep these to a minimum. A simple structure is good.

    The ideal is perhaps a Trust that incorporates the Unit Trust and the Discretionary Trust…….and I Think this is called a Hybrid Trust.

    SO my final question is

    Is there any benefit in setting up something other than a Hybrid Trust without a company or involved?  Running costs should be lower and easier to handle and the 19 rental properties eventually being built would be just as protected as through another type of setup but with less hassle.

    TerryW should I go to the Strategicwealth people at Hurstville and ask them about this, my current accountant is ok (I think) but it doesn't hurt to ask for another opinion.  I was under the impression that a lawyer would be needed for advice and setting up the trust.

    It all seems to be coming down to a refined answer…..thankyou

    Paul

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

    Hi Paul

    With this there are at least 2 aspects of asset protection.
    1. You as an individual were be sued and to go bankrupt.
    2. The owner of the property is sued.

    When an individual goes bankrupt assets held as trustee for another person do not form part of your estate. Also an interest in a discretionary trust is not considered property and does not form part of your estate.

    With 2 if you use a company as trustee then you will be adding another layer to the protection if something happens in the property – tenant electrocuted, collapse of a wall killing someone etc. generally the company and trust will wear the loss and not yourself as you would be only director and shareholder. There are exceptions of course.

    A unit trust is good to hold assets as it enables transfers of ownership/control easily without changing the title deeds. But units are property and could fall into the hands of creditors if you were to go bankrupt at any stage. hence owning them in a discretionary trust. The DT will also offer tax flexibility

    This is not a hybrid trust, but something different. A hybrid trust is one trust which has the ability to issue units and also has a discretionary component. Your unit trust could be done as a hybrid with no discretionary component at issue, but it could be possible for the trustee to buy the units back off the trustee and convert the unit trust into a discretionary trust. This can be good because the trustee could borrow to buy the units and the borrowings tax deductible.

    If you do set up a structure with yourself as trustee you may save $500 but you will be taking a lot more risk with your personal assets (bank would get a personal guarantee anyway so if the project fails your assets will be at risk anyway) and you will lose the flexibility of ownership via a company. It only costs about $212 per year to have a trustee company.

    I would suggest you read this whole thread http://www.somersoft.com/forums/showthread.php?t=71494 on trusts as there are some great posts in there.

    You would generally need the advice of a lawyer and an accountant and a mortgage broker on something like this as you must factor in the ability to get finance.

    First would suggest you ask your own accountant and ask him for reasons for his decisions. Then report back here and we will critically exam the response.

    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 GatewayGateway
    Participant
    @gateway
    Join Date: 2011
    Post Count: 12

    Hi Terry W

    Just contacted my accountant and we will meet later this month.

    The accountant knows about trusts and companys and suggested a modification to your suggestion (it was just a quick phone call so maybe I got it wrong).
    The suggestion was ,,a UT with a company trustee and a DT with a company trustee. with the DT owning the UT (basically this was your advice)………I thought two companys were overkill with the DT but I will take advice. Mum will own the Units in the UT and be the Appointer for UT and DT. Also Share holder and Director.

    The accountant also said that they only cost $218 per year to run. 
    I guess as they are just "figure head" companies for the trust there won't be any financials , GST, ABN necessary and it is just a matter of sending in the returns to the tax office and ASIC as per another your info to another poster in this section.

    I will also contact my Solicitor on monday.

    Will keep you up to date on how this adventure progresses.

    I was starting to think this was all to much hassle until I look at mum's ex husband possibly contesting the will when the time comes.  Will my brother and I be able to operate her companies and trusts when she passes?

    Regards
    Paul

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

    Very good Paul

    Did you know that trust assets generally no not form part of the estate of the individual on death, but in NSW under the succession Act there is a section where trust assets can be held for form part of the notional estate of the individual. Then under the Family Provision sections of the Succession Act ex spouse are classed as eligible persons able to contest a will. Therefore it would be possible for the ex-husband to make a claim on the trust assets, especially if your mum died within 3 years of transfer. But, this doesnt mean he will succeed.

    Also, before you set the above structure up make sure finance will be available.

    Having a company as trustee of the discretionary trust which will hold the units is a good idea. $218 pa in not much (asic fees just went up!) and this will add extra asset protection as there are circumstances when unit holders can be liable for the debts of the trust.

    Trustee companys dont have any money so the tax returns are just nil returns usually.

    You should get your mum to look at estate planning issues with the structure too. Good that you have picked it up as most people don't even think about it. Since trust assets don't form part of the estate you need to consider who takes control of the discretionary trust. This is usually done by drafting the deed with clauses saying X is appointor, but on her death X on his death Z etc. Once you are appointor you can control the trust by changing the trustee. In this case there will be a company as trustee so you will need to look at taking control of these companies too. If the shares are held by your mum then these can be left in the will. If these shares are held by another trust then you need to consider this too.

    Also, consider getting your mum to set up a testamentary trust in her will. These have huge advantages in asset protection and taxation.

    I am also a solicitor doing a masters degree in estate planning. If you want to meet up one day in the city we can have a chat.

    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 GatewayGateway
    Participant
    @gateway
    Join Date: 2011
    Post Count: 12

    Hi TerryW

    I would certainly appreciate that chat.

    This has been a continual learning path

    My curretn thoughts are now (my thoughts seem to change by the day now that I have discover these forums).

    after participating in this thread and reading alot of others, I am leaning towards a Testimentary Trust as there will be no need to spend thousands on transferring the titles over to a UT/ DT and assett protection for a 65 year old lady who wants to retire is probably ok with the insurance that you pay for every year with each house. 
    A Testimentary Trust < I am hoping> will circumvent any challenges to the will.  This seems to be the only possible problem I can see on the horizon.

    TerryW – sent you a PM

    Paul

Viewing 20 posts - 1 through 20 (of 22 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.