How to disentangle a trust with minimal cost?

With the need for a family trust now gone (set up by our late parents and now run by my brother and me), we have talked about splitting things between us, so that we can untangle our lives financially.

We are on very good terms, no issues there, but rather than keep the trust running which ties our two families together, we could each take our own inheritance and head in the direction we feel comfortable with. My brother and I have very different risk profiles and thoughts on where and how to invest.

We also have various children with loans which is tying up the existing trust LOC and I will be wanting to use the LOC to build townhouses in a year and prefer to not tie up the joint LOC. If we each take our own half, I can set up my own LOC and take on my own children's loans. My brother can do the same with his kids and any loans to them.

We want to start this process in this current financial year, but realise the costs of moving things to our own names (or new structures) will work best if we minimise the costs (selling costs, stamp duty costs if we don't sell but simply transfer from the trust to our own name, or to a new trust).

When my parents set up this trust, they used RetireInvest to get things into the trust at the optimal timings to keep the costs down, spread over several financial years. The chap was very helpful, knowledgeable and this process worked well. He is not there now. I could use someone new there but I wonder who else could do this sort of thing... accountant? solicitor? financial planner?

A financial planner would get no commission from selling us anything as we are buying nothing, but like happened with RetireInvest, we would set an upfront fee for the work to be done.

Is RetireInvest our best choice and if not, who could steer us through this process, which will take at least two financial years.
 
A lawyer would be needed for the legal side - winding up, advising on stamp duty issues and drafting documents. A tax agent for the tax side - CGT consequences. Fianncial planner - not needed unless you want advice on where to invest the funds.

This is a great example of trusts and succession. There is no dispute involved but still people like to go their own ways - image what could have happened if there was a dispute.

So if you control 1 trust and have 2 children what are you going to do? One solution would be to make them both appointors - but what if you had 3 children? And what if they want to separate their portions.

A partial solution may be to start 2 trusts and try to keep the values of them roughtly the same so that when you die you can leave control of trust A to child A and trust B to child B.
 
Thanks Terry. We have three boys, two of whom are settled with jobs and one at nearly 19 not yet partnered, no job, unsure of what he wants to do. We have given him a year since graduating to find himself and now we are pushing him to make some decisions and find some focus. He is a good kid, but right now we don't know if he will veer off the straight and narrow. Right now, I wouldn't want to risk setting up three trusts until I know he is not going to just rely on that.

Oldest has a partner, middle boy has a fledgling romance, youngest is unattached.

I'm not sure that our needs right now for setting up our own LOC will translate easily into leaving things neatly for our sons. We are in our mid 50s and hubby is retired but I work casual retail for an interest - pay ranges from zero to $1000 per fortnight depending on shifts). We would be going for some kind of asset lend.

We will be borrowing to build the townhouses (if we get approval) and each of the townhouses will be set up in a trust to minimise land tax (at this stage that is the plan). We will end up with trusts coming out of our ears.

This is going to be tricky.
 
Have you planned for the succession of control of these trusts? Your kids could end up in a similar situation to you.
 
Have you planned for the succession of control of these trusts? Your kids could end up in a similar situation to you.

That is what I'm looking to do as we get to the stage of setting them up. The townhouses are at least 12 months away, but the splitting of the current trust is going to start this financial year.

We are not sure if we will move things to our own names (or a new trust), sell and buy something in a SMSF, put it all on black :D
 
The legal advice needs to consider how or if the trust may be terminated. Who is to benefit and what other claims may arise. I have seen some trusts with clauses that prevent vesting.

Its definitely important as Trustees will be personally liable and if assets are discharged they will be liable for shortfall. It may not even be practical to discharge part of the trust over two years.

Estimate of CGT and taxes for beneficiaries worth doing in advance THEN tax work when its finalised. I might suggest a fee estimate paid by the trust is prepaid. Its easier that way.

May be cheaper to use a solicitor who can also do tax. They can advise on strategies to time taxes that minimise cashflows and also future strategies and tax benefits. Not sure why a financial planner may be involved ??
 
Good solution.

Is it worth considering 3 testamentary trusts as part of the future planning?

One will (each) that creates three TT's. That's normal. You don't really want a single TT for three adult beneficiaries. But it can work in some instances. The beneficiaries positions may impact this.
 
Sounds like you need a lawyer and accountant, Terry is both....

No, actually I am not an accountant, I have no qualifications in accounting - but some in tax. I am director of a company that is a tax agent - Property tax Solutions Pty Ltd.
 
No, actually I am not an accountant, I have no qualifications in accounting - but some in tax. I am director of a company that is a tax agent - Property tax Solutions Pty Ltd.

Ah ok sorry for some reason I thought you were a qualified accountant as well but focused more on the law side. Either way I suspect you'd be able to help Wylie out!
 
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