Discretionary vs Unit Trust

Hello I am sorry if this has been covered before but I am unable to find the answers.

I have a few IPs and will continue to get more. But I am now in a position where I need asset protection. ( I know should have thought about this earlier)

This is my situation.

I would like to buy some IPs for negative gearing and some purely for build and sell. I have two sons and I would like all of these properties eventually to go to them or maybe even use them for low income distribution.

So from what I can figure out. Disc Trust is for the buy and sell and Unit trust is for the negative gearing. How can do I structure this so when the negative geared property starts to become positive I can determine where the income is distributed. Initally I would like the income to come only to me but that may change over time.

Can you have the Disc trust as the beneficiary of the unit trust? But if that is the case then how do you deduct you interest etc or do I have to know if I am going to hold on or sell prior to purchase so I can use the right trust? Although the unit does not give me protection. Where do you pay the stamp duty?

Any suggestions??
 
Everything I read a bout a Hybrid trust is don't go there, however it appears to be exactly what I need.

I am employed and earn $100k so I am looking to use negative gearing for the time being. The goal is income for retirement.

I think too much I have another question...Do you set up a trust for each property you buy or do they all go under the one trust? Or does that depend on the financial situation eg negative gear me only or buy and sell I would like to split income with boys.
 
Unit trust won't offer much in the way of asset protection - your units held may be attacked.

Discretionary trust will offer asset protection but losses cannot offset your employment income. You can however offset losses if you have another discretionary trust producing income (eg. investment or business) - this trust distributes it's income to the loss trust to soak up those losses.

The question is though, if you are employed, why do you need the asset protection? Further, if asset protection is indeed important to you, what are you going to do about the properties held in your own name currently?
 
So from what I can figure out. Disc Trust is for the buy and sell and Unit trust is for the negative gearing. How can do I structure this so when the negative geared property starts to become positive I can determine where the income is distributed. Initally I would like the income to come only to me but that may change over time.

The income from the unit trust goes to the unit holders. You may transfer the units to your sons or to a discretionary trust when they become positively geared. However such a transfer will incur both stamp duty costs and capital gains tax.

Can you have the Disc trust as the beneficiary of the unit trust? But if that is the case then how do you deduct you interest etc or do I have to know if I am going to hold on or sell prior to purchase so I can use the right trust? Although the unit does not give me protection. Where do you pay the stamp duty?

The discretionary trust will be the beneficiary of the unit trust if it owns the units. The interest deduction will be in the disc. trust if it has borrowed to purchase the units.
 
Given your ultimate goal is to receive an income from the portfolio in retirement, is negative gearing really a major factor at this point in time?

Using a discretionary trust, the losses are held within the trust until it becomes profitable. This could allow you to receive some of the profits effectively tax free when the trust is cashflow positive.
 
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