Trusts ? Do we really need them ??

Ok ( playing devils advocate here .. )

Over the last years I seen a series of complaints from people about the increased costs of holding IPs in trusts. Seems to be a big issue in NSW with land tax.

Upto date we havn't had an IP in NSW and in Q'land and tassi , where we hold our IP's , by seperating our properties between trusts we pay minimal if any land tax.

Asset protection seems the big issue from my concern ( the kids can be gratefull for what they get ...)

Does anyone have first hand knowledge of anyone being sued in relation to an IP and loosing other assets ?

Obviously protecting your IP's for work related liabilities is another issue. I work in a " high risk " profession , but I'm insured for that and to the best of my knowledge , short of wilfull gross negligence on my behalf , I'd be well and truly covered .

Are trusts just a great way for our legal and accounting fraternity to generate income stream ?

What do you think ? I'm not sure.

Cliff

For intergenerational wealth transfers I'm sure they have their uses.

As far as asset protection goes I'm not convinced of the need - they just seem like a big pain in the bum. They would be useful if they protected your assets in the event of a bankruptcy but I suspect they would not?

see_change said:

Seems to be a big issue in NSW with land tax.

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Hi SC,

Land tax is the only real issue I have with trusts. 1.7% of land value pa is a huge chunk out of growth. In future I'll make sure I use up my personal threshold before using trusts.

see_change said:

Asset protection seems the big issue from my concern ( the kids can be grateful for what they get ...)

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I think a regularly topped up 80% LVR is sufficient deterant for asset protection purposes. The drawn down equity can be lent/gifted to a trust for purchase of eg shares or LPTs. This makes it much more likely that any equity growth in IPs is locked away from creditors.

Cheers Keith

I basically agree with Keith. I wouldn't purchase properties in a trust until all other avenues have been used to their full advantage.

A discretiionary trust is fine for shares as there is no litigation risk "within" the structure and hence no need to keep setting up new trusts after reaching 1 mil + in asset value.

In hindsight I feel that in our situation the trusts have been a waste of time, effort and money. We are in the gradual process of getting rid of a couple of the trusts so that in the end all we have is assets in a single Disc Trust, SMSF and personal names. The HDT is going to be the next to be closed down - will be glad to be rid of that one.

As for accounting fees it is obscene what some accountants charge for very straight forward Trust tax returns.

Of course everyones situation varies and I'm sure that for some Trusts really are worthwhile.

Cheers - Gordon

I have used trusts with a corporate trustee in the past and in hindsight it was a waste of money and time. I am now in the process of selling the assets held in the trusts and deregistering the company. The trusts become inactive and aren't required to submit a tax return.

An accountant on this forum quoted me $600 to deregister the company.... i have since found a better accountant who has said i can do it myself for $32 with a standard form downloaded from the ASIC website

We most of our ips in a family trust mainly for ease of passing assets onto children and discretion in distributing income.

We were not focusing on tax minimisation.

We were very much thinking long term rather than short to medium term.

We were not pressured into this by anyone.

Overall we are happy with our arrangement.

Hi Seech. How ya goin? Your new job must be keeping you busy.

Can't really help with the trust question as we've never used one even though, as Mrs Fish is an accountant, we could have kept costs down. Never seemed much point. But that could be what you're asking anyway.

Was that one of your "team of experts"?

nomadic said:

An accountant on this forum quoted me $600 to deregister the company.... i have since found a better accountant who has said i can do it myself for $32 with a standard form downloaded from the ASIC website

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nomadic said:

I have used trusts with a corporate trustee in the past and in hindsight it was a waste of money and time. I am now in the process of selling the assets held in the trusts and deregistering the company. The trusts become inactive and aren't required to submit a tax return.

An accountant on this forum quoted me $600 to deregister the company.... i have since found a better accountant who has said i can do it myself for $32 with a standard form downloaded from the ASIC website

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Yes, simple things such as change of address, annual returns/solvency etc can be costly if done by an accountant especially if you have mutiple trusts. It is worthwhile for those that have trusts to do a simple search of the ASIC website. They make it very easy and either free or at a minor cost for the layperson to do things such as change of address, deregistration, return and solvency etc.

Cheers - Gordon

evand said:

Was that one of your "team of experts"?

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lol, no he never made it through the front gate. I now have an accountant with more scruples.

I think trusts are very useful for tax purposes unless you have a very steady future as far as earnings go. I have sold property in a trust in a year when my wife was not working and I was. When we bought the property both of us were working and earning similiar coin. Had we just gone 50:50 in our our names it could of been an expensive thing.

Yes this is very true for those that want to save some money.
Another accountant i know charges $198 to fill in a form 484 (change of address)

austini said:

Yes, simple things such as change of address, annual returns/solvency etc can be costly if done by an accountant especially if you have mutiple trusts. It is worthwhile for those that have trusts to do a simple search of the ASIC website. They make it very easy and either free or at a minor cost for the layperson to do things such as change of address, deregistration, return and solvency etc.

Cheers - Gordon

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we set up in a trust purely for income distribution - hubby on good money, myself a stay a home mum and investor.

in hindsight it did us a serious disservice, but only because we didn't read the "end of the boom" signs. it now means we have some large losses trapped in the trust and there is no way to get them out other than via trading them out - which is what we intend to do in the coming 12-24 months.

Sounds like the "protection from being sued" line is a furphy put forward by people making money out of it all?

I have one property in a unit trust. It's -ve geared. Seemed like a good idea at the time but don't see the point now. Nothing but extra costs. Maybe in the far future I might be able to transfer it to a SMSF without having to pay stamp duty.

Stating the obvious but apart from land tax costs a discretinary trust sounds like it might be OK if +ve geared enough?

boomtown said:

They would be useful if they protected your assets in the event of a bankruptcy but I suspect they would not?

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They can, and generally should protect from "nuisance" litigation, but it will need some careful construciton if you are protecting it from a serious creditor attack. SMSF would be a different matter altogether.

Cheers,

The Y-man