hybrid trust qu

Hi all,

Just wondering....can you set up a hybrid trust so that only one spouse owns any units in it, and then later on (years later) the other spouse then buys units???

I'm asking because my wife is in a litigious career whilst I am not. So we are thinking of buying IPs in the name of a hybrid trust, with me owning all of the units and the neg gearing benefits also going just to me. We aim to reach a point where we have enough passive income coming from the IPs (and some shares too, also owned by the trust) that we can retire (young hopefully). At that time, my wife's risk of being sued is gone (I hope) and then she could buy units in the hybrid trust so we can split the income between the two of us.

Is this OK, or does it all depend on how you draw up the trust deed?

Cheers

John
 
Hi John doe,
normally your wife would be a beneficiary of the trust and could receive income as a distribution from it. Probably would not need to buy the trustee units. The IP's & other investments are in trust for the beneficiaries!
Terry
 
Hi John

Yes you can issue units to your wife at a later date with the deed i use.

Depending on circumstances at the time this may not be the best course of action

Cheers
NickM
 
Hi Nick,

Thanks for your reply. So, can you distribute income to a beneficiary of a hybrid trust even if they don't own units in the trust?

Thanks

John
 
John
Depends on the deed.
My deed wont allow it if the trust is fully capitalised with issued units.

Once some units have been redeemed the discretionary element takes effect.

NickM
 
Originally posted by NickM
Depends on the deed.
My deed wont allow it if the trust is fully capitalised with issued units. Once some units have been redeemed the discretionary element takes effect.

Is there a reason why your deed is structured that way - is it to get around the whole "discretionary/therefore not a right" thing?
 
No Kev
The reason is that the ATO will not allow a tax deduction for interest incurred on a loan unless you can show that you will receive income without discretion.

Nick
 
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