What are the advantages of a family trust or any other sort of trust for the regular property investor?, and disadvantages , please. thanks
Family trust?
- Thread starter ronnieandkylie
- Start date
Talk to your accountant, to NOT take this as advice. For a family trust:
Pros:
1) Stream income and capital gains to low tax rate beneficiaries
2) Asset protection for you personally
3) Ease of inheritance. Shares in the trustee company can just be passed to beneficiaries when you die.
Cons:
1) Losses trapped in the trust until trust income sufficient to offset it. Not so good initially for -ve geared IPs.
2) Trust has a limited life of 80 years
There are plenty of threads on HDTs, but I'm not touching that.
Alex
I thought the CGT discount happened at the beneficiary level. Like you get from LPT distributions. So if the trust makes $20k in CG, it distributes $20k CG to me and I apply the discount in my personal tax return and claim $10k.
Some states do not have separate land tax thresholds for trusts and companies as opposed to thresholds for individuals.
Alex
some states have no threshold on land tax for properties in a trust.
family trust doesn't allow you to claim losses against other income - losses are trapped in the trust until the trust is making a profit. family trust also allows you to choose who the profit are directed to, so you would direct them to the lowest income earning adult in your family.
a hybrid discretionary trust allows you to claim losses against other income by the highest tax payer buying "units" in the trust via lending the mortgage money to the trust and when it becomes a positive situation the trust pays out the "unit holder" and reverts to a family trust.
talk to a very property savvy accountant - ask on this forum for recommendations in your area.
also, buy "trust magic" by dale gatherum-goss (google it). cost $100 as last look - may be more now - but worth every cent to help your understand trusts.
family trust doesn't allow you to claim losses against other income - losses are trapped in the trust until the trust is making a profit. family trust also allows you to choose who the profit are directed to, so you would direct them to the lowest income earning adult in your family.
a hybrid discretionary trust allows you to claim losses against other income by the highest tax payer buying "units" in the trust via lending the mortgage money to the trust and when it becomes a positive situation the trust pays out the "unit holder" and reverts to a family trust.
talk to a very property savvy accountant - ask on this forum for recommendations in your area.
also, buy "trust magic" by dale gatherum-goss (google it). cost $100 as last look - may be more now - but worth every cent to help your understand trusts.
Available here $52 as a pdf download.
Magic stuff. Absolutely essential reading for a minimal cost, compared with the potential benefits.
It has been updated- but the jury is still out on Hybrid Discretionary Trusts (HDT).
