Forums / Property Investing / Creative Investing / Wanting More Info on Trust Accounts for Investing

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  • Profile photo of princesshayleykprincesshayleyk
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    @princesshayleyk
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    My Husband and I have recently started a Mobile Mechanical Business and our accountant advised we start as Sole Trader with view to change over to a Trust in the not to distant future.  I have previously owned Investment Properties and we will be getting back in to them in the not to distant future.  We'd also like to have a go at Commercial Investments. 

    My Question is, where are the best places to learn more info on setting up and the benefits of Trusts?  We'd rather do everything right from the start than have to change bits later or learn the hard way.

    TIA,

    Hayley

    Profile photo of Scott No MatesScott No Mates
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    Get your accountant & solicitor in a room at the same time. Run through your expectations & outcomes then let them discuss the details, pros & cons.

    Profile photo of TheFinanceShopTheFinanceShop
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    From a lending perspective – there may be restrictions associated with the type of trust you set up. Just make sure that you are aware of this in case the accountant say recommends a Hybrid Trust. 

    Regards

    Shahin

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    Profile photo of princesshayleykprincesshayleyk
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    We'd be aiming for Negatively geared with the IP at least, would we be better off keeping it separate? We're very new to the Business Owners World, I didn't even know you could Mix the IP & Business as far as teh trust was concerned until the accountant mentioned it.  We will definitely be going back to see him when we are in the position to Invest, I'm just trying to learn what I can between now and then.

    Profile photo of TheFinanceShopTheFinanceShop
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    I can't comment on whether it would be better to keep it separate or not and it depends what your definition of better is? From a tax perspective? Asset protection perspective?

    I small problem will be that you will not be able to borrow from traditional lenders if you have just started the business. LVR plays a very important part too.

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    Profile photo of princesshayleykprincesshayleyk
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    hmmmm interesting, Thanks Shahin

    Profile photo of TerrywTerryw
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    For trusts just use google and start reading. Lots to take in. Or buy the book "Trust Magic"

    For your business I would suggest you quickly move over to a Pty Ltd company, either in its own right with sharehs owned by a discretionary trust or as trustee. This company should not buy property for asset protection reasons. Businesses high a very high chance of getting sued so you wouldn't want to lose your properties.

    If you will be negatively gearing a trust cannot distribute a loss. So this will not directly assist in saving tax. But befcuase you will be running a business one trust can distribute to another so the business income can be offset by the negative property and this will save you tax.

    You also need to consider land tax.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
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    Profile photo of shereebeckershereebecker
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    I've also heard other opinions from people who recommend to just get out there and start investing and use the profits to set up all those things once you've got the money to do it, as it can be expensive. I didn't do this and not necessarily recommending it but its another thought out there to consider…

    Cheers

    Sheree

    Profile photo of TerrywTerryw
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    Too late to consider asset protection once you have purchased a property and too late to implement tax saving strategies (largely).

    Each person has to weigh up the costs v benefits I guess.

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    Profile photo of rudra_rrudra_r
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    Hi Terry,

    Just looking at the TrustMagic book at the moment and noticed the pricing of it ($99 Hardcopy – prefer that to the PDF version), would like to know your thoughts on the book before I go out and buy it.

    Profile photo of TerrywTerryw
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    rudra_r wrote:
    Hi Terry,

    Just looking at the TrustMagic book at the moment and noticed the pricing of it ($99 Hardcopy – prefer that to the PDF version), would like to know your thoughts on the book before I go out and buy it.

    It is the best easy going intro into trusts I think.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
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    Profile photo of princesshayleykprincesshayleyk
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    Is it fairly Reader friendly Terry? I have a 1&2 year old so my brain is still a bit mushy!

    Profile photo of IP FreelyIP Freely
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    There aren’t lots of pictures in the book Princess, so the kids will get bored with it very quickly.

    How did you get them to read at such a young age?

    ;)

    Profile photo of TerrywTerryw
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    princesshayleyk wrote:
    Is it fairly Reader friendly Terry? I have a 1&2 year old so my brain is still a bit mushy!

      As reader friendly as it is possible.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
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    Profile photo of princesshayleykprincesshayleyk
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    ha ha ha Very Funny :-p

    Profile photo of Daneo79Daneo79
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    N.E.Renton 'Family Trusts' is about $40 and covers types of trusts, pros and cons, Btafeficiaries, and how you're taxed. It is set out so you can just flick to the chapters relevant to you and what you may want to do.

    Profile photo of TerrywTerryw
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    I recall many years ago in the early days of learning about trusts. I had both Rentons and Trust Magic and found Renton's pretty dry reading. I never did finish reading it, but it was good to flick through for additional clarrification every now and then.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
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    Profile photo of KeithMewesKeithMewes
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    I'm not an expert and cannot offer advice but my understanding is to always keep the business and any IPs completely separate. Some even recommend that the business be split as well, such as if you have plant & equipment this is owned by a trust and leased to the business. I personally will be buying IPs in a discretionary trust with a non-trading corporate trustee. 

    I understand that the idea is to put as much distance between you and any assets, liabilities, etc and just benefit as a beneficiary. This is for asset protection as well as litigation protection.

    But as I said, I am not qualified to give advice, this is just what I have picked up along the way and you MUST consult with qualified people such as accountants and solicitors. But make sure they know what they are talking about (always a tricky one to ensure).

    keith

    Profile photo of TerrywTerryw
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    KeithMewes wrote:
    I'm not an expert and cannot offer advice but my understanding is to always keep the business and any IPs completely separate. Some even recommend that the business be split as well, such as if you have plant & equipment this is owned by a trust and leased to the business. I personally will be buying IPs in a discretionary trust with a non-trading corporate trustee. 

    I understand that the idea is to put as much distance between you and any assets, liabilities, etc and just benefit as a beneficiary. This is for asset protection as well as litigation protection.

    But as I said, I am not qualified to give advice, this is just what I have picked up along the way and you MUST consult with qualified people such as accountants and solicitors. But make sure they know what they are talking about (always a tricky one to ensure).

    keith

    That is generally the way to go Keith. But it is also important how the trust is set up and how deals are structure, who guarantees what, what is used as security etc too.

    When talking about asset protection people are usually talking about keeping assets from creditors in the event of bankruptcy. Other things to consider are family succession plans and family law issues.

    Imagine you having spend thousands on legal advice and having a great asset protection plan in place and then your spouse dies leaving you the house – or one of/ both of your parents.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
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    Profile photo of princesshayleykprincesshayleyk
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    Great Advice above guys, I appreciate it.  Would you suggest looking in to the Trust option ASAP?  We have only been in business 7 weeks but it's looking rather promising and we already have plans to expand in the next few months.  I have no dramas in spending the money up front if it means saving money and hassle down the track…

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