Discretionary Trusts

[Terryw]

A few points for Sean

Why have 2 trustees? This means double the risk. I would use one if possible.

Preferably a company trustee for added protection. I disagree with Rolf too, the assets of a trust are not personal property of the trustee and so do not form part of their estate and are protected from creditors if the individual goes bankrupt - but there are some exceptions.

Having a company as trustee will make lending a little bit harder.

Since in QLD there is no stamp duty on trusts (is this still the case?) why not just have 1 trust per property? It will only cost you another trust deed, and a little bit of accounting each year, but it will be so more flexible. You could each be trustee of one trust - while both appointors on both trusts.

 

[brendio]

Since in QLD there is no stamp duty on trusts (is this still the case?)

There's no stamp duty up to $350k.

My question is, does this limit apply per trust or per beneficiary? For example, for a trust with five beneficiaries, does one fifth of the value apply to each individual? I guess that since in a discretionary trust, the beneficiaries do not actually have a claim on the assets, they can't be charged land tax on it at a personal level. Is this right? I may have answered my own question and am slowly getting more of a grip on how trusts work.

 

[Terryw]

hi Brendio

I think that must land tax you are referring to/?

I was referring to the stamp duty on the establishment of a trust. It is now $550 in NSW (was just $200 last yr) so it hurts every time you create a new trust deed.

I think with the land tax it is the trustee that is assesed and pays the amount out of the trust funds.

 

[brendio]

I think that must land tax you are referring to/?

Yes. Sorry, I got a bit mixed up, and obviously still have more to learn about trusts. I've got land tax on the brain, since I had never heard of it until recently and had to check that it wouldn't throw a spanner in the works we are planning. With the proper timing, we should be right.

Stamp duty as such doesn't exist any more in Qld. It's called transfer duty now, although I think everyone still calls it stamp duty.

This page here says that "If you create or terminate a trust over dutiable property in Queensland or acquire or surrender an interest in a trust that holds dutiable property (directly or indirectly) in Queensland, you must pay transfer duty at current transfer duty rates." But these duty rates are the same as would be payable on transfer to an individual, so there does not appear to be any extra duty for setting up the trust. Of course, you would be up for duty if you create a trust and then transfer existing property into it, which is what we are planning on doing, but the benefits should far outweigh the cost of the duty.

 

[mja]

MJA,

No not a Chan & naylor trust but a Macquarie Group Services trust. They have the advice from the OSR on their website which confirms the land tax threshold applies to these trusts

http://prc.macquariegs.com.au/

This looks interesting. Thanks for sharing! I'll check this out when I exhaust my NSW land tax thresholds in my name.

 

[More IP]

Slightly off the topic - with regards to lawsuits and discretionary trusts, I am an electrical contractor and have to by law have $5M public liability. From that aspect, do I really need a trust structure or could I purchase properties in my/joint names?

Thanks

 

[Terryw]

Slightly off the topic - with regards to lawsuits and discretionary trusts, I am an electrical contractor and have to by law have $5M public liability. From that aspect, do I really need a trust structure or could I purchase properties in my/joint names?

Thanks

What about if someone were to sue you for something unrelated to work?

 

[More IP]

Would an example be for instance... say if I knocked a pedestrian over in my car???

 

[Terryw]

Yes, particularly if you had a drink before hand and your insurance didn't cover you.

More common is a business related debt. You might go into business with someone in the future. Something happens, maybe not your fault, and there is a large debt. You are sued and cannot pay. Your assets are then sold off.

Assets of a discretionary trust are not your own and so are generally safe (not always tho)

 

[More IP]

Thanks Terry, any recommended reading on Trusts?

Have heard that the ATO 'dislikes' against Hybrid discretionary trusts? Is this correct? Are standard Discretionary trusts the better option?

Thanks

 

[mja]

Search this forum using Google for keyword "trusts": http://www.google.com.au/search?q=trusts+site:somersoft.com

The ATO has had issues about how people use HDT's. If you want some sleep at night factor, get a private ruling from the ATO if you intend to use one.