Another question on trusts

Could I setup a family trust if I am working F/T (a permanent employee) and then distribute the profit between the beneficiaries? And would it actually make sense for me to do it.
Thanks in advance.
 
Originally posted by h8dk97
Could I setup a family trust if I am working F/T (a permanent employee) and then distribute the profit between the beneficiaries? And would it actually make sense for me to do it.
Thanks in advance.

HI Jerry

Yes, you can establish a trust whilst working full time. The trust can distribute income to any of the beneficiaries however, the trust cannot earn your income for you . . . if that is where you are heading.

Have fun and good luck

Dale
 
To add to Dale's comment...

I've just set up a trust in order to buy a cash flow positive property (Dale's manual was the instigator for this).

The trust earns income from the property. That income has to be distributed. I can choose which of the beneficiaries gets income- and that can vary from year to year, as circumstances change. I can pay my kids up to $640 pa- so their pocket money comes out of pre tax income- and I can additionally pay them for jobs they do in relation to the property.

As well as that flexibility, I can isolate claims on my property to the property in the trust. If a tenant sues me big time, I can lose the property in the trust- but my house is protected.
 
Re: Re: Another question on trusts

Originally posted by DaleGG
HI Jerry

Yes, you can establish a trust whilst working full time. The trust can distribute income to any of the beneficiaries however, the trust cannot earn your income for you . . . if that is where you are heading.

Have fun and good luck

Dale

Thanks very much for replying Dale.
Does that mean that I will still have to pay the same tax as I am paying now (I'm in the highest tax bracket)?

Another thought that I had, can my wife and I sell our POPR to our family trust and then the trust would rent it out to us? The only drawback I can see now is the stamp duty.

Thanks again.
Jerry
 
Originally posted by geoffw
To add to Dale's comment...

As well as that flexibility, I can isolate claims on my property to the property in the trust. If a tenant sues me big time, I can lose the property in the trust- but my house is protected.

Hi geoffw,
Thanks for your comments.
If you have more than one property in the trust, could they be affected if someone sues you over one of those properties?
 
My understanding is that other properties in that trust could also be affected if someone sues.

I know of one person who has a lot of properties who has no more than four properties in one trust unit for that reason.
 
I thought the whole point of setting up a trust was so that if you are sued they can't touch your property in the trust as you don't own it. Can they sue a trust?
 
Geoff,

may I ask what was your actual total set up costs for your trust were and what you expect your annual compliance and running cost to be. Also, what "type" of trust did you set up.

I have read estimates of cost but was wondering about actual costs.

thanks

Macca
 
Macca,

I have set up a discretionary trust, without any company structure. Setup cost was $660; I have not had it long enough to know annual running costs.

I think Dale's setup includes a company structure, so costs a re higher.

Dale, what is the advantage of including a company in the structure?
 
Originally posted by Macca
Geoff,

may I ask what was your actual total set up costs for your trust were and what you expect your annual compliance and running cost to be. Also, what "type" of trust did you set up.

I have read estimates of cost but was wondering about actual costs.

I'm not Geoff but I'll give you my setup costs.

Last trust set up was a unit trust for a development project that got stalled on takeoff.

$1020 for the Company
$310 for the Trust deed
$200 Stamp Duty on Trust deed

Figure an accountant will add $250-$400 on top for basic service and a premium advisor will charge about $3,000 all up.

Annual costs
$200 to ASIC for the annual return of the company
plus annual return and tax preparation fees as a minimum. If the company does nothing but act as trustee it is cheaper.

My advice if you want to grow your wealth: find an advisor and pay them for ongoing advice. DO NOT use them as a mere bookkeeper (i.e. don't seem them once a year).

Originally posted by Jude H
I thought the whole point of setting up a trust was so that if you are sued they can't touch your property in the trust as you don't own it. Can they sue a trust?

They can only sue the trustee. So there are two schools of thought 1) change the trustee after the action commences leaving them with an empty shell. 2) If the trust deed indemnifies the trustee then limit the assets in any one trust.

Originally posted by h8dk97
Does that mean that I will still have to pay the same tax as I am paying now (I'm in the highest tax bracket)?

Actually you'd be worse off. Trusts and corporate structures are for people running businesses and investments. They are not an effective way of earning your pay packet as a PAYG employee.




Regards Paul Zag
 
Originally posted by paulzag
I'm not Geoff but I'll give you my setup costs.

Actually you'd be worse off. Trusts and corporate structures are for people running businesses and investments. They are not an effective way of earning your pay packet as a PAYG employee.

Regards Paul Zag

Hi Paul,

Could you please expend a little bit on that, why exactly would I be worse off, because of the overheads involved or any other reasons? And could trust rent a property to its beneficiary(s)?

Thank you.
 
Originally posted by h8dk97
Could you please expend a little bit on that, why exactly would I be worse off, because of the overheads involved or any other reasons? And could trust rent a property to its beneficiary(s)?

I'm not Paul, but...

You'd be worse off as the trust must distribute the income. All that goes to you would still be taxed at your personal rate. Also, you'd have overheads in running the trust itself, and unless you had a hybrid trust, you would be unable to negative gear (something high income earners look at).

The trust could rent the property to its beneficiaries, however this must be at market rates. This comes under the 'at arms length' the ATO likes to see.

If you are thinking of selling your PPOR to the trust, you'd have stamp duty issues, and you would lose out on CGT should you sell from the trust at a later date.
Jas
 
Thank you Jas.

Originally posted by Jas
I'm not Paul, but...

You'd be worse off as the trust must distribute the income. All that goes to you would still be taxed at your personal rate. Also, you'd have overheads in running the trust itself, and unless you had a hybrid trust, you would be unable to negative gear (something high income earners look at).

The trust could rent the property to its beneficiaries, however this must be at market rates. This comes under the 'at arms length' the ATO likes to see.

If you are thinking of selling your PPOR to the trust, you'd have stamp duty issues, and you would lose out on CGT should you sell from the trust at a later date.
Jas
 
If you are thinking of selling your PPOR to the trust, you'd have stamp duty issues, and you would lose out on CGT should you sell from the trust at a later date.

How would you lose out on CGT should you sell at a later date?
Does this mean it is better not to have your PPOR in a trust?
Roz
 
Originally posted by Roz

Does this mean it is better not to have your PPOR in a trust?


A very good reason to have your PPOR inside a trust is asset protection. Should someone decide to sue you personally, they can take all you own (including your house). If its inside a trust, you don't own it, so they can't take it.

Jas
 
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Hi

At the risk of creating more confusion than I have cured, I have answered this issue in another post only a moment ago.

CGT need not apply to your PPOR when in a trust . . .

Have fun

Dale
 
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