Help. Asset protection advice by tomorrow

Blueberry

Blueberry

Hi,
Going to see our accountant tomorrow morning about setting up asset protection. I asked today on the phone what he would recommend off the top of his head. He mentioned we should buy under hubby's name so we can deduct everything, then buy shares in a company, which would then lend money to the trust.

Does that sound right or would he have meant the loan is in hubby's name? To buy shares in company to loan to trust? I did confirm that he didn't mean a trust with a company trustee.

I read through Ed Chan et al "how to reduce your tax legally" or whatever it is called and couldn't see mention of something similar.

Does this sound right,? Any questions I should ask? Would that incur paying GST? I want to go in with a base knowledge and I feel he pulled one out that I have no knowledge of.

Thanks
 
Apparently.

If I went to a lawyer they would be fabulous at the asset protection side and not so hot on the accounting side wouldn't they?

(think I'm being eaten alive at every post here. Good thing I guess in that I get saved from my own stupidity)
 
Blueberry - the problem with this whole asset protection thing is that there is no correct answer. If you are looking for the magic bullet then the accountant (or a lawyer, for that matter) won't give it to you because it doesn't exist. What you need to work out first is what it is you actually plan to do (in great detail), then a planning process can be formulated around that. Otherwise it's just too many contingencies so the structure suffers.
 
I suppose I'd expect the average accountant to be good at tax side of things, and absolutely clueless about asset protection (even if they thought otherwise).

On the other hand, I'd guess the average appropriately qualified lawyer to be fairly good at both tax and asset protection. And if they weren't good at tax, then they would at least be honest about that fact.

Is asset protection a primary concern for you?
 
Asset protection isn't as important for the first few I think as the are capital growth properties. Any time I get a build up of equity I'm planning on taking it to buy more property. (held in other structures and assuming I'm allowed to)

Having said that, DH is in an occupation where asset protection is considered a must.
 
Cash flow properties I'm planning on locking down tight. By then DH I'm hoping will be a convert to the property game and less compromises will need to be made.
 
Asset protection is legal advice. He may have some knowledge if he is a registered liquidator/bankruptcy trustee as these guys attack assets all the time. But the average accountant wouldn't have a clue as they

Ask him if he is familiar with the corporations act, bankruptcy act, succession act, conveyancing act and the voluminous case law. Ask him what a 'constructive trust' is and see how he answers.
 
thatbum said:
I suppose I'd expect the average accountant to be good at tax side of things, and absolutely clueless about asset protection (even if they thought otherwise).

On the other hand, I'd guess the average appropriately qualified lawyer to be fairly good at both tax and asset protection. And if they weren't good at tax, then they would at least be honest about that fact.

Is asset protection a primary concern for you?
Click to expand...

I think you can be on the money there with a lot of Commercial lawyers. But then a lot of suburban lawyers have no real idea about trusts in a true commercial sense.

I have most of my Masters of Laws Subjects in Tax Law. Would I actually work out someone's tax liability? No. I work in conjunction with an Accountant who actually does property stuff for himself. There is nothing like having had your own coin on the line to make sure you know it inside and out.

I think many accountants overstep the mark, so do many lawyers. Lawyers have better insurance though.
 
Terry_w said:
Asset protection is legal advice. He may have some knowledge if he is a registered liquidator/bankruptcy trustee as these guys attack assets all the time. But the average accountant wouldn't have a clue as they

Ask him if he is familiar with the corporations act, bankruptcy act, succession act, conveyancing act and the voluminous case law. Ask him what a 'constructive trust' is and see how he answers.
Click to expand...

I came against a liquidator today that has a lawyer on his team and they still had 2/3rds of stuff all knowledge about the law surrounding what they do. I am not sure how some of them manage without getting sued left right and centre.
 
Got back from accountant. His solution was for Hubby to borrow 100% of the purchase price. Buy the same number of shares for $1 in company. Company then lends funds to a discretionary trust to buy property.

So the loan is tax deductible an for Hubby and we have house in trust and the income from the house is directed towards me (lower income earner).

I can't seem to see any examples of this on Somersoft or online...

So would you get whacked with tax avoidance here? He said that the trust wouldn't have to pay interest on loan from company?

So the expectation of making a profit I guess comes from when I earn enough to be taxed above 30% so we would divert additional income into company, which then would pay hubby dividends.

He also said I don't need a company trustee as guidelines for transferring the trustee have relaxed...


I'm going to call the mortgage broker tomorrow to see implications for banks lending. Probably an idea to get a quick check over by a lawyer too. Does anyone see anything worrying or obvious?
 
I may have what you are saying wrong and I need more info but some questions anyway.

Blueberry said:
Got back from accountant. His solution was for Hubby to borrow 100% of the purchase price. Is he using the property as security?

Buy the same number of shares for $1 in company. Company then lends funds to a discretionary trust to buy property.

So the loan is tax deductible an for Hubby and we have house in trust and the income from the house is directed towards me (lower income earner).

I can't seem to see any examples of this on Somersoft or online...

So would you get whacked with tax avoidance here? He said that the trust wouldn't have to pay interest on loan from company? If the trust doesn't pay company interest then how is the bank loan to buy shares for the purpose of deriving income?

So the expectation of making a profit I guess comes from when I earn enough to be taxed above 30% so we would divert additional income into company, which then would pay hubby dividends.

He also said I don't need a company trustee as guidelines for transferring the trustee have relaxed... What about asset protection?


I'm going to call the mortgage broker tomorrow to see implications for banks lending. Probably an idea to get a quick check over by a lawyer too. Does anyone see anything worrying or obvious?
Click to expand...
 
Blueberry said:
Got back from accountant. His solution was for Hubby to borrow 100% of the purchase price. Buy the same number of shares for $1 in company. Company then lends funds to a discretionary trust to buy property.

So the loan is tax deductible an for Hubby and we have house in trust and the income from the house is directed towards me (lower income earner).

I can't seem to see any examples of this on Somersoft or online...

So would you get whacked with tax avoidance here? He said that the trust wouldn't have to pay interest on loan from company?

So the expectation of making a profit I guess comes from when I earn enough to be taxed above 30% so we would divert additional income into company, which then would pay hubby dividends.

He also said I don't need a company trustee as guidelines for transferring the trustee have relaxed...


I'm going to call the mortgage broker tomorrow to see implications for banks lending. Probably an idea to get a quick check over by a lawyer too. Does anyone see anything worrying or obvious?
Click to expand...

Let me think this through.
Hubby is borrowing 100% of purchase price to borrow what? To buy shares.
The company then lends the money to a trust which pays cash to purchase a property.
The shares would be income producing because?
The trust would be paying interest to the company. This interest is presumably passed on to hubby to enable him to be able to claim the interest on the shares.

Can you give an example with numbers?
eg/ $100,000 property.
Husband borrows $100,000 to buy 100,000 shares in company A. Company A lends $100,000 to Trust X. Trust X buys the property which returns say $5000 pa in rent. But trust X incurs interest to trust A, at 6% this would be $6,000 so there would be a loss of $1,000 in the trust plus depreciation etc.
$6,000 income to Company A. This is then passed through to husband who claims $6,000 in interest. Husband would not have any benefit.

Also to borrow the money what is the security? It would have to be the property, so you would have the property owned by trustee Z but want the loan in the name of Mr Hubby. This will cause problems like the hybrid trusts. Could be done though.

Now what happens if Hubby is sued? Creditors could stand in his shoes. So creditors would get the income from the shares and creditors would own the shares and control the company. So creditors will be owed $100,000 from the trust. They would essentially get the value of the property. Hubby would also be defaulting on the loan at this stage and the bank would take the property which is being held as security.

I must have not understood. Where is the benefit?
 
vaughan said:
Buying OTP, the relationship you have with the developer?
Click to expand...

Constructive trust is one where there may not be any formal trust in place but the court construes one to be there.

eg. Husband buys house in wife's name. Husband pays deposit and pays the monthly loan. Wife doesn't contribute any funds.

This would be a constructive trust with the wife merely acting as trustee for the husband. So if the husband went bankrupt the creditors could easily get at this property 100% or maybe 50% of the value as this would be the husband's share
 
Blueberry said:
Does anyone see anything worrying or obvious?
Click to expand...

Yes, it doesn't make any sense.

Blueberry said:
Got back from accountant. His solution was for Hubby to borrow 100% of the purchase price.
Click to expand...

Secured against what?

Blueberry said:
Buy the same number of shares for $1 in company. Company then lends funds to a discretionary trust to buy property.

So the loan is tax deductible an for Hubby
Click to expand...

Only if there's income distributed from the company. In any case, what would possess a bank to lend him the money in the first place? Where's the security?

Blueberry said:
and we have house in trust and the income from the house is directed towards me (lower income earner).
Click to expand...

If the trust doesn't pay interest to the company, the company can't pay anything to the shareholder. Deductibility of the interest to buy the shares is impossible to justify in a related entity.

Blueberry said:
I can't seem to see any examples of this on Somersoft or online...
Click to expand...

Because it doesn't make sense.

Blueberry said:
So would you get whacked with tax avoidance here? He said that the trust wouldn't have to pay interest on loan from company?
Click to expand...


While your husband gets the deduction on the borrowings to buy the shares?

Blueberry said:
So the expectation of making a profit I guess comes from when I earn enough to be taxed above 30% so we would divert additional income into company, which then would pay hubby dividends.
Click to expand...

That's the least of your worries.

Blueberry said:
I'm going to call the mortgage broker tomorrow to see implications for banks lending. Probably an idea to get a quick check over by a lawyer too.
Click to expand...

Do you understand the structure? I sure don't.
 
You must log in or register to reply here.

Similar threads

Terry_w
Asset Protection Tips
Replies
17
Views
3K
Paul@PFI
Paul@PFI
W
Trust structure
Replies
6
Views
2K
Terry_w
Terry_w
D
Structure for a surgeon
2
Replies
20
Views
4K
drfuzzy
D
T
What consitutes legal advice?
Replies
7
Views
4K
Terry_w
Terry_w
M
Best Structure
Replies
13
Views
3K
Terry_w
Terry_w
Back
Top