How do I set up a trust?

OK - I've been doing some more research on trusts, and now I totally get why they're a good idea. I've also ordered Dale's book to learn some more.

Now: how do I go about setting up a trust? How long does it take? How much does it cost? Also, I've read that they can be a pain-in-the-butt to maintain. What is everyone's experience with this? I'm just an ordinary person with no tax or accounting expertise. Would I be able to cope with managing a trust?

And finally: this is a real dumb question, but I need to ask it. Do I need a different trust for each IP I buy? Or do I only have to set up ONE for all future IPs?

Thanks,

Harriet

I set up a trust by going to my accountant. It cost $660 (inc GST) and only took a few days. It hasn't come tax time yet, so I don't know about maintaining it. But the trust does have a separate bank account.

A friend with a lot of properties puts 4-6 properties in one trust before starting anmother one.

How do you set up a trust. Easy - go to your accountant and pretend you're a Star Trek capitan.

"Make it so"

They do all the hard work

It took me about two weeks before I had the trust, but I wasn't in any hurry... You can get them set in a a day ot two if you need it.

Costs? 'bout $2K to set up, and running costs depend on how complicated your accounting's getting. Do a small business coruse at an evening collage if you have no expereince in accounting.

If you have a company trustee, you'll also need to send a piece of paper to them at tax time - that costs around $200 each year.


Jas

BTW my trust was for a simple trust with myself as trustee. You can get extra protection by having a company trustee. Jas can correct me on this- but I assume that the difference between the price for my trust and the price for hers would be that hers would include the cost of setting up the trustee company?

Yes, I had to set up the corp trustee...

Jas

PS: I shouldn't have posted my 2K figure, as it was a while ago and frankly I'm not sure how much it was... more than 1K defently

The best way to set one up is with a Company as the Trustee and you as the Appointor

The cost of running a trust is only the tax return for it i.e. the accounting costs

Please note that all the dealings are done through the trust so there is no tax return for the company only the $200 to the ASIC each year.

The best way is to set up a trust for each property you buy using the same Company as the Trustee this way you have isolated the property from others as far as ownership is concerned and therefore limit the possibility of loosing more than one property should you get prosecuted by a creative tenant due to slipping on the soap in the shower because you did not provide a soap holder. Don’t laugh it happens and the above example would favoured the tenant.

To register a company and a trust is about $1500.00

Always go for a discretionary trust they are the most flexible and give very good tax flexibility
And also the lending institutions understand this one more than they do other forms of trust

There are some special rules and conditions in setting a trust up these must be followed for the trust to be bullet proof should a liquidator go for you and they are as follows

1 Open the trust account and 1st deposit the cheque ( from the settlor ) within 28 days of signing the trust paperwork

2 Pay the stamp duty also within 28 days of signing the paperwork

3 The account name must be “xyz Pty Ltd as trustee for the abc trust”

4 When you buy property it must be bought in the name of “xyz Pty Ltd as trustee for the abc trust”

5 The Settlor is the person or Company that gives you the check to deposit into the Trusts account this cheque is a gift and usually $10 make sure it is a gift and there is no record of you paying / refunding / being charged for this $10 cheque because if there is a record then the trust does not hold water

Some people say that you have 90 days to do what I have specified in 28 days I have heard of problems so why argue and take the chance do the above in 28 days and sleep at night


Hope this helps or have I confused the %$@#$ out of you guys

Darren

Hi Darren Ski,

Thanks alot for your post, answered just about all of my questions before i got a chance to ask them

-Regards

Dave

Wow! Thanks so much to Darren for his comprehensive reply. Yes, I am a little confused, but no more than usual! And your post gives me definite questions to put to the accountnat who I ask to do the trust for mme.

Thanks again,

Harriet

It’s a pleasure to assist in any way I can

One more thing just for the record a Trust can only be setup by a lawyer

So if you go to the accountant guess where he goes

Just thought you might want to know because the accountant will not tell you this ( well maybe some of them will not )

Is there a dislike regarding accountants in the air as far as I am concerned. Hmmmmm

The good accountents are hard to find but they are out there

Hi again,

Does this mean I should go to a lawyer rather than an accountant to set up the trust? But then again, a lawyer won't understand the tax implications as thorougly as an accountant!?

What do YOU do?

Cheers,

Harriet

Harriet,

See an accountant. They manage the process with the lawyer.

Of course you can go to a lawyer direct, but you're likely to get a square peg for a round hole.

And good accountants are easy to find, just ask on the forum.

Cheers,

Aceyducey

Hi Harriet

I go to my lawyer to set up a trust

I have found that its hard to find a reasonably priced accounted that has your interests at hart.
That is why I look into these issues, educate myself and then argue with the accountants on how things should be done and somehow we all go home happy.

My advice is that there is no one better than yourself to look after your affairs
You should be educated in all aspects of IP,s but you don’t have to have a degree to command respect from the so called professionals

Hope this helps


Darren

OK - thanks. Can anyone suggest a fabulous lawyer/accountant in Sydney who can look after me trust-wise? I need someone who can sort through all the details in a simple fashion, because this stuff does confuse me. And I need someone who won't charge a fortune to do it - just a fair price.

Can Dale help me - even tho' I'm in NSW and he's in Victoria?

Thanks,

Harriet

Harriet,

Dale probably could help you from Victoria- interstate is not really a problem dealing interstae- HOWEVER, unless Dale contradicts me (perhaps by a private message to you) I gather he is EXTREMELY busy, and it might be difficult for you to achieve something quickly.

Setting up a standard trust should not be too hard to achieve. Get into the yellow pages for accountants close by, and ask a few questions- especially questions you may have already had answers for. Like "SHould I?", "How Much?" and "Why?"

Also ask IP questions, say about deductability. Look through the forum for some questions (clue- look for Dale's answers first, then ask the questions).

If you need more advanced structures- say hybrid trusts- NickM should be able to help.

Originally posted by Darren Ski
The best way to set one up is with a Company as the Trustee and you as the Appointor

There are some special rules and conditions in setting a trust up these must be followed for the trust to be bullet proof should a liquidator go for you and they are as follows

1 Open the trust account and 1st deposit the cheque ( from the settlor ) within 28 days of signing the trust paperwork

2 Pay the stamp duty also within 28 days of signing the paperwork

3 The account name must be “xyz Pty Ltd as trustee for the abc trust”

4 When you buy property it must be bought in the name of “xyz Pty Ltd as trustee for the abc trust”

5 The Settlor is the person or Company that gives you the check to deposit into the Trusts account this cheque is a gift and usually $10 make sure it is a gift and there is no record of you paying / refunding / being charged for this $10 cheque because if there is a record then the trust does not hold water

Some people say that you have 90 days to do what I have specified in 28 days I have heard of problems so why argue and take the chance do the above in 28 days and sleep at night
Hope this helps or have I confused the %$@#$ out of you guys
Darren

Click to expand...

I would be very interested to see any stautory law or cases that require a cheque be deposited in the trust account within 28 days on behalf of the settlor.
The problem with depositing money in a bank account is that if the balance falls below $10 then there is no longer a trust.
To be prudent, i recommend that $10 cash be stapled to the deed, but again this is not a legal requirement.

If the trust is challenged it must be proven that the trust was settled with $10. If the Settlor is not able to provide this evidence (eg has passed away) then the trust may be challenged. The settlor can settle the deed with the $10 and then take the $10.

Stamp duty is not due within 28 days.
In NSW i recommend that my clients stamp their deeds within 3 months to avoid paying late penalties.
Again there is no strict legal requirement to stamp the deed within a specified period.

If a deed is not stamped, it may well be a contributing factor in determining and justifying that the trust really exists.

To ensure the deed is established with no scope for challenge, i recommend:
1. Staple $10 cash to deed +
2. Pay the stamp duty.

NickM

Hi,

If we are talking $10 cash been stapled to the trust deed for proof, what evedince or documentation does there need to be, to show where the cash came from?

I could staple my own $10 of cash, and say it came from the settlor?

Cheers
mono

monoply said:

Hi,

If we are talking $10 cash been stapled to the trust deed for proof, what evedince or documentation does there need to be, to show where the cash came from?

I could staple my own $10 of cash, and say it came from the settlor?

Cheers
mono

Click to expand...

As long as there is $10 there and the Settlor says it came from them, no problem. No need to make it too overly complicated.

I once joked in a trust seminar that around lunch time, I get pretty hungry and its hard to get change and I have all these lovely trust deeds cashed up with $10 lying around..... but they said that if I took the $10 that the trust may be invalidated. Oh well.

For those game enough to try it on their own:

www.lawcentral.com.au
www.cleardocs.com.au
www.chrisbatten.com.au

It would be preferable if you set your trusts up through a professional, but these sites are also probably good for getting a better understanding on trusts and related issues.

Regards

Terryw

I use law central for all of my deeds.
And set everything up myself.
Its easier in Queensland as you don't have to worry about getting your trust deeds stamped.

cheers

I just had a look at that cleardocs site.
You can register a company online in only a few minutes.
Last time I had to go into the city and line up for half an hour, not to mention getting a park.

Might give them a try next time I need a company structure.

cheers