Forums / Getting Technical / Legal & Accounting / Best method for Asset protection

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  • Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,190

    Here is a link to something I wrote explaining ‘all monies’ clauses. https://www.propertyinvesting.com/topic/5025757-what-is-an-all-monies-clause/

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
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    Profile photo of BalaBala
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    @balaji
    Join Date: 2016
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    Hi Terry,

    Been reading your comments and find them to be extremely informative. Thanks for that!

    I have a question related to the trust set up. Is it possible for me (assuming I am the director of the trust company) to appoint my minor child as a beneiciary of the trust? Or should I wait till he turns 18 to have him included?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,190

    Yes it is possible. Most discretionary trusts would name a person and then say ‘all children, grandchild’ of the above.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Profile photo of Corey BattCorey Batt
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    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    As Terry has said – there’s usually broad definitions in the trusts which count children, grand children, extended family etc.

    Corey Batt | Precision Funding
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    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of BlairBlair
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    @blair777
    Join Date: 2015
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    Hi @terryw, you mentioned that you have read Dymphna’s book on asset protection and that it has many holes in it and that you couldn’t recommend it. What specifically is erroneous about the information she shares? I read Dymphna’s book and it seemed to be a good introductory guide for the layman but I admit I am inexperienced in this area. I’m new to investing (recently purchased PPR and in the process of purchasing first IP) and want to set up a trust structure for asset protection that I can replicate/build on as I continue to build a property portfolio but I am finding the myriad of perspectives and opinions online and on forums confusing. I talked to an accountant about setting up a trust structure for my first IP and he told me that I shouldn’t set one up until I have bought 2 or 3 IP’s to show that I am serious. That didn’t make much sense to me as I’m aware that you can’t retrospectively restructure properties from personal names into trusts easily or effectively. Would you recommend buying 2-3 IP’s before considering trust structures as I have been advised? I have appreciated your comments and feedback on other forums and your tips on your profile and would appreciate further clarity on these two questions I have raised. Thanks!

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,190

    I would have to go back and look, but there are many incorrect statements and much that was left out. She doesn’t mention constructive trusts or resulting trusts for instance.

    Trusts are very complex and are legal relationships, I am not sure why people go to accountants for advice on trusts or asset protection as this is law – outside of the accountant’s knowledge or licencing – why did you go to an accountant?

    Whether you should use a trust or not will entirely depend on your situation, where the property is and what you are trying to achieve. You should seek specific advice from a lawyer.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,190

    If you have any specific asset protection questions ask away, but I can’t really answer ‘should I’ type questions with something other then ‘it depends’ because it really does depend.

    example.
    Should I use a trust to buy property in NSW?

    This will depend on
    – if it is negatively geared
    – you have used up your land tax threshold already
    – if you are concerned about asset protection
    – if you understand the implications on death
    – on your family situation
    – on your financial situation

    For example if you are a business owner and need to give perosnal guarantees for leases etc then you may be at risk of being sued. You now have to consider whether you are willing to pay an extra 1.6% pa in land tax to gain some asset protection. On a $400,000 land value property this would equate to $6,400 per year in land tax which you would not otherwise have. Is asset protection worth paying $6,400 per year for the next 40 years or so?

    If not, then there are other options – a company with shares owned by the trustee of a discretionary trust.
    Alternatively a property owned by your spouse.
    or owned by yourself with a mortgage to a discretionary trust

    If you are buying in QLD the same issues don’t arise because a trust gets a separate land tax threshold.

    Once you have determined the ownership structure you need to determine the structure of the structure – terms of the trust, who plays what role, planning for death, bankruptcy, insolvency and family law disputes. If a company is involved then you need to determine the structure of hte company.

    Once that is done then you need to understand how to fund it – gift or loan the deposit in. Who should be the giftor/lender and who to dcocument this

    etc

    etc

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Profile photo of BlairBlair
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    @blair777
    Join Date: 2015
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    Thanks for the reply @terryw, I went to the accountant because I was referred to him after making enquiries about setting a trust structure up but you make a valid point in that this should more appropriately be dealt with by a lawyer. For my first IP I was looking at paying an investment company to act as a mortgage broker, buyers agent, property management, all-stop shop etc to help me buy my first IP. When I made enquiries with this particular company in regards to buying the property in a trust structure they referred me to their accountant who advised me to wait a few properties before setting up a trust structure (even though he himself has a number of trust structures with his IP’s). I’m looking at buying the property in Queensland for the purpose of asset protection. You’ve said enough for me to understand (as I suspected) that I need more adequate legal advice on this issue. It would be great if I could pay you for your services in this area. I will call your office tomorrow to have a chat. Thanks, Blair

    Profile photo of Shane WShane W
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    @shanewebb
    Join Date: 2016
    Post Count: 17

    Hi Terry,

    Have you read the book “Family Trusts – A plain English guide for Australia Families” by N.E. Renton and Rod Caldwell?

    If so, would this book be any use for protecting assets in a trust?

    I would like to sit down with someone in Melbourne to advise and set up a structure for me. Do you have any recommendations for someone to help me in Melbourne?

    Many thanks

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    I have that book by Renton. It doesn’t cover asset protection – just mentions it vaguely in less than 1 page.

    if you want to see someone in Melb then try Allan Swan http://epeq.com.au/aswan.htm

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Profile photo of fxdaemonfxdaemon
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    @fxdaemon
    Join Date: 2013
    Post Count: 114

    An unregistered mortgage isn’t indefeasible as it is unregistered. Lodging a caveat doesn’t register it, the caveat just notifies others there is an unregistered interest. It may give priority over other non registered interests though. To make the mortgage stronger it should be registered.

    Hi Terry,
    Just following up an older topic here and hope you are able to clarify and help.

    Regarding your comment above, what is the process and logistics of registering such a mortgage
    when there isn’t any real money involved, but merely the equity of a property?

    Also, will the first mortgagee deny such registration?

    Thanks,
    FXD

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
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    You can’t gift equity in a property – the gift will fail unless the gift is delivered.

    To register a mortgage is easy, just enter into a loan agreement incorporating a mortgage and fill in the real property act forms that go with it and lodge with the land titles office. This will then be a legal mortgage, as opposed to a equitable mortgage. BUt this doesn’t mean it provides asset protection, because a mortgage is a form of security – asset protection will depend on the strength of what it is securing. If it is a loan and no money has been transferred then it is not a loan!

    (I reviewed one of these recently. A loan and mortgage was set up, but the loan was never actually taken out. no money changed hands)

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Profile photo of fxdaemonfxdaemon
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    @fxdaemon
    Join Date: 2013
    Post Count: 114

    Thanks Terry.

    So does this basically mean it’s not an asset protection at all?
    I am wondering why so many experts out there still advocating that this method
    is a sound asset protection, or may be I am just not getting my head around it.

    Rgds,
    FXD

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,190

    Thanks Terry.
    So does this basically mean it’s not an asset protection at all?
    I am wondering why so many experts out there still advocating that this method
    is a sound asset protection, or may be I am just not getting my head around it.
    Rgds,
    FXD

    Before I answer
    What exactly are you referring to?

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Profile photo of fxdaemonfxdaemon
    Participant
    @fxdaemon
    Join Date: 2013
    Post Count: 114

    Thanks Terry.
    So does this basically mean it’s not an asset protection at all?
    I am wondering why so many experts out there still advocating that this method
    is a sound asset protection, or may be I am just not getting my head around it.
    Rgds,
    FXD

    Before I answer
    What exactly are you referring to?

    Terry,
    I am referring to your previous comment on registering a legal mortgage does not make that an asset
    protection. Or have I misunderstood what you said?

    Thanks,
    FXD

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    Yes merely registering a mortgage without it relating to a proper commercial transaction doesn’t give any asset protection, other than a smoke and mirrors approach. Someone glancing at a certificate of title may see a mortgage and just give up there and then – believe it or not this stops many.

    But if there is any challange it can be easily attacked and set aside under several methods such as s301 Bankruptcy act http://www.austlii.edu.au/au/legis/cth/consol_act/ba1966142/s301.html

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    I am wondering why so many experts out there still advocating that this method
    is a sound asset protection,

    Are they experts?

    If they are not lawyers then they have no business advising this. If they are lawyers then they should be able to present their arguments on why it does provide asset protection.

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

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

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