Company as a Trustee

Hello,

A bit of background first.

I've got a Hybrid Discretionary Trust that I started at the beginning of this FY. I also have a Company, which is about a year old because I'm self employed. When I created the Trust, I put myself as the Trustee because my Company is less then two years old and I heard that banks don't like to deal with Companies that are less then two years old.

Since starting up the trust, I've bought one slightly -ve geared IP by buying units in the property. This means that although the Trust owns the property, I am on the actual title of the property.

I know that it is better to have the Company as the Trustee from the asset protection point of view. My plan is to make the Company the trustee, but I don't fully understand the implications on the current property in the Trust.

I was wondering if anyone has been in the same situation and what they have done.

In particular, here are the major questions that I have:

1) If currently I'm on the Title of the IP because I'm the trustee, what happens to the title when the trustee changes to a company? Do I have to amend the Title?

2) Does changing the Trustee cause a Tax event to occur? What I mean is: Will I have to pay Stamp Duty again? Will I have to pay CGT?

3) What are the implications when Borrowing money and the Company trustee is less then 2 yrs old?

4) How do people usually borrow money then the Company is the Trustee? (eg No Doc loans etc)

5) I heard that a Trust has a life of 80 years. I've also heard somewhere that this is only true if the Trustee is a person and that if the Trustee is a Company, then the life of a trust does not expire. Is this true?

Sorry about posting tough questions again, but I guess in life you always have to learn and then you die.

Anyway, I'm sure others might be interested in some of the questions too. If you are, let us know.

Thanks in Advance.

Kind regards,

Orion
 
O, see answers in CAPITALS below. sorry for brevity - have plane to catch.

Originally posted by Orion
Hello,

A bit of background first.

I've got a Hybrid Discretionary Trust that I started at the beginning of this FY. I also have a Company, which is about a year old because I'm self employed. When I created the Trust, I put myself as the Trustee because my Company is less then two years old and I heard that banks don't like to deal with Companies that are less then two years old.

Since starting up the trust, I've bought one slightly -ve geared IP by buying units in the property. This means that although the Trust owns the property, I am on the actual title of the property.

I know that it is better to have the Company as the Trustee from the asset protection point of view. My plan is to make the Company the trustee, but I don't fully understand the implications on the current property in the Trust.

I was wondering if anyone has been in the same situation and what they have done.

In particular, here are the major questions that I have:

1) If currently I'm on the Title of the IP because I'm the trustee, what happens to the title when the trustee changes to a company? Do I have to amend the Title? YES

2) Does changing the Trustee cause a Tax event to occur? What I mean is: Will I have to pay Stamp Duty again? NO (THERE MAY BE SOME NOMINAL AMOUNT, WHICH VARIES STATE TO STATE BUT U WON'T PAY FULL AD VALOREM DUTY). Will I have to pay CGT? NO.

3) What are the implications when Borrowing money and the Company trustee is less then 2 yrs old? TALK TO YOUR BROKER

4) How do people usually borrow money then the Company is the Trustee? (eg No Doc loans etc) NO REAL DIFFERENCE - LENDER MAY ASK FOR DIRECTOR'S GUARANTEE FROM YOU AND MAYBE A CHARGE OVER THE COMPANY

5) I heard that a Trust has a life of 80 years. CORRECT I've also heard somewhere that this is only true if the Trustee is a person and that if the Trustee is a Company, then the life of a trust does not expire. Is this true? FALSE. LIFE OF TRUST IS 80 YRS (THIS IS CALLED ITS PERPETUITY PERIOD) LIFE OF COMPANY IS INDEFINITE - COMPANIES ARE IMMORTAL :D MAKES NO DIFFERENCE TO LIFE OF TRUST IF T'EE IS A CO.

Sorry about posting tough questions again, but I guess in life you always have to learn and then you die.

Anyway, I'm sure others might be interested in some of the questions too. If you are, let us know.

Thanks in Advance.

Kind regards,

Orion
 
Orion hi,
I am not sure I would use an existing "trading company" as my trustee company. As you said you work for yourself and setup the company to, I assume, run your business, whatever that maybe.

By using this company as your trustee company as it is active and trading it is exposed to risk, as your trustee company is indemnified by your trust for work carried out on its behalf you may be inviting a situation that you may not want.

Why not just set up a new $2 company to be your trustee?

Also I don't see how the age of the company (trustee in this case) affects your borrowings! Reason - it is not the trustee company that is borrowing the money, it is generally you as an individual, who then swaps that money with your trust for income units, the trust then uses that money to by the property offering the property as security.

The Trustee is only acting on behalf of the trust and doing the running around and signing papers on its behalf etc, yes the Trustee name is on the title but is was signed xxxxx As Trustee For yyyyyy. It is the trust that actually owns the property not the trustee regardless of the trustee name on the title. It would cost you some $$ to change the name on the title to ensure your "structure" is kept correct in the eyes of the authorities but you are not triggering a CGT event as ownership had not changed.

I am sure the legal eagles will speak up if this is in any way incorrect or misleading.

regards

Norman
 
Originally posted by NormH
By using this company as your trustee company as it is active and trading it is exposed to risk, as your trustee company is indemnified by your trust for work carried out on its behalf you may be inviting a situation that you may not want.

I've often heard this (and even followed the same advice), but I wonder if it really makes much difference.
The trading company has liabilities;
1. from it own activites,
2. its trustee activites.

In 2, it is indemnified by the trust, (the same as a vigin company.)

In 1, if it is sued, it can't use the trust assets because it doesn't own them, and if that happens you would just start a new company and change the trustee, but until that you're only paying for 1 company not two.

Regards,
Kim
 
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