All Topics / Legal & Accounting / Trust vs own name

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  • Profile photo of MsTrumpMsTrump
    Participant
    @mstrump
    Join Date: 2008
    Post Count: 27

    Hi,

    While I’m enthusiastically searching for the answers, I would appreciate some valuable input in the meantime:

    I have four properties to my name and am looking at adding more to the portfolio. At what stage do I start looking at trusts vs buying in my name? My main concern is the generated profit in, say, 10 years, or rather the tax that will attract. I know trusts can have benefits in that regard.

    I’m also worried about asset protection, especially in the event of separation and/or being sued.

    Thanks!

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

    You should consider trusts from the first property onwards – not neccessarily using trust to own one but to at least consider it..

    Trusts generally don’t help much under the family law side

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

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

    Profile photo of MsTrumpMsTrump
    Participant
    @mstrump
    Join Date: 2008
    Post Count: 27

    Thanks, Terryw.

    What are the benefits? And how would I go about setting it up?

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

    Benefits are broadly

    estate pllanning
    tax savings
    asset protetection

    See my book “Trusts and Tax for Property Investors”
    download for free at http://www.propertytaxsolutions.com.au/

    To set one up you should seek legal and tax advice and have a lawyer draft a deed. For stamp duty purposes trusts are generally set up with cash, just $10 or so, and this is added to later.

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

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

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Trusts can have very real benefits, but for some people they can be rather superfluous or ‘over kill’. As Terryw has mentioned, it is well worth considering, weighing up the pros and cons of buying in the type of structure. Finance can be affected by purchasing through a trust – something to keep in mind.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of tanner892tanner892
    Participant
    @tanner892
    Join Date: 2013
    Post Count: 25

    Surely you wouldn’t want to hold property in a Trust if they are negatively geared ?

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

    Why rule it out?

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

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

    Profile photo of tysmeistertysmeister
    Participant
    @tysmeister
    Join Date: 2015
    Post Count: 3

    @mstrump

    There are a couple of different trust structures that you could use, a “unit trust” and a “discretionary trust” (or family trust). Without more information about your circumstances the following information is predicated upon the latter (which is suitable for tax optimisation within a family structure). The “discretionary trust” allows for income earned within the trust to be allocated to nominated beneficiaries at the discretion of the trustee. Thus if your spouse, who is a beneficiary is on a lower marginal tax rate you can stream income and realise a tax saving.

    Some things to bear in mind:
    – Any child under 18 who is a beneficiary under the trust will have any distributed income taxed prohibitively at the top marginal rate
    – If you are the only beneficiary you cannot also be the trustee, however you can incorporate a Pty Ltd company of which you are sole director to act as trustee
    – You will need a settlor to create the trust with a token amount (e.g. $10) and this should ideally be your accountant, lawyer or some other unrelated party (it cannot be a beneficiary). Once the trust is settled the settlor has no further rights or obligations.

    tysmeister

    • This reply was modified 5 years, 9 months ago by Profile photo of tysmeister tysmeister.
    • This reply was modified 5 years, 9 months ago by Profile photo of tysmeister tysmeister.
    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    A child can earn up to $416 pa and not pay tax. Not much but it all helps.

    A beneficiary can be trustee and the trustee can be a beneficiary, but not the sole beneficary as otherwise there would be no trust.

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

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

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