Positive experiences with trusts

The difficulty with this topic is that the people best placed to advice on this (accountants) have an inherent conflict of interest.

That's not true. Any decent accountant would simply outline the pros and cons applicable to their client, as you have done in your post. The greater concern is to provide the client with a good level of service, not to set them up structures they don't need.
 
I have seen accountants pushing trusts using the 'asset protection' scare tactic without mentioning that the risk is very low for employees.

I guess it all depends what you call 'decent'

Cheers,
 
Trust can and do oofer asset protection.
The 1st question how and in what circumstance.
The 2nd is at what cost.

To most heavily geared investors the answer is it's too expensive.
To others it's handy to have such assets here & there held by other entities.
Most people here pay insurance they've never claimed on, it's no different.

imo you will get no asset protection by "buying the new house through a trust so that we can negatively gear it" if your hoping to get tax credits on your personal assessment.

My partner is skeptical about it and says if it was a good way to buy a house why isn't everyone doing this?
For most it's not feasable or economical, and again if you borrow in your personal name and lend to the trust or buy units, imo there is no asset protection.

I am sure a smart lawyer can crack something that set up by your joe bloke accountant or solicitor.
I'm sure a smart lawyer (in the burbs) can make it uncrackable.

The difficulty with this topic is that the people best placed to advice on this (accountants) have an inherent conflict of interest.
Ownership structures is the domain of lawyers moreso than accountants.
If you have a problem with a trust, or a claim, your gonna need a lawyer not an accountant.
 
One of my clients has gone under - bankrupt because of business dealings and personal guarantees. But he still has a lot of property in 'his' discretionary trusts.

Going bankrupt has still hurt him and was very stressful, with him losing a lot of weight, but he is not totally defeated.
 
Terryw, mind if I ask details of the trust & properties, whose name on the DT & the properties. Is there a company trustee because it will add greatly setup/ongoing fees. Also if the business in your name only, the properties are in your spouse's name, will it offer asset protection ?
 
He had or has various trusts, some with corporate trustees and some with other family members as trustees.

Having a company should only cost $212 extra per year for ASIC fees. They will need to lodge a nil tax return so no, or little extra accounting. $400 to set up now. But loans can be slightly harder to obtain with a company - many low docs won't lend to companies either.
 
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Going bankrupt has still hurt him and was very stressful, with him losing a lot of weight, but he is not totally defeated.

Terry, I've been thinking of losing some weight this year. How much weight did he lose with this strategy?

(sorry mate, I wish him a speedy recovery)
 
This trust thingy is really a risky business, depends on how it's set up, often the accountants/solicitors don't really fullymnunderstand the inside out/implications themselves (or just want the money). I was told by my accountant that the HDT can now be used just as a regular DT, feel like you are asked to drive a car blindfolded, and the instructor doesn't really know how to drive this monster call trusts, you don't know there's an accident until you smash into a wall.
 
hi BF

Most HDTs can be used as a DT. They only become a HDT if the units are issued.

But I agree with what you say. Most lawyers and accounts don't understand the principles behind them and don't understand their practical applications either.
 
Hi Propola,
Start to look at the end picture and then work backwards to organize your structure for holding property.

At the moment you have 2 IP's in your own name, one has been your PPOR so if you need to sell one, this would be it. You probably only receive a small Land Tax bill as you only have 1 IP up to this date. Your scenario in a few years if you decide to move out of your 3rd property and rent it will be a much larger land tax bill.

Just to check, multiply the land component of your 1st IP by 3 then double it and you will get an idea of your land component in 10years(if you don't buy more), then work out how much your land tax will be. Make sure you are sitting down:)

We originally bought in our own names and the land tax issue is and will cause more of a problem, which we are working on. We now use DT's. If we didn't use trusts land tax payable on our next purchase would be 80% of the rent. There are other ways to minimize Land Tax ie buy in different states, but I just wanted to flag the problem.

If you hold your home in a DT and it is negatively geared the losses accumilate, but you can utilize the losses if the Trust makes a profit from shares or it owns another IP that's positively geared.

Cheers Bushy
 
land tax depends on the state. in nsw, in a trust, there is "no" threshold before land tax is calculated on an ip. therefore, for any property held in a trust you have to pay land tax from the first dollar of value in nsw. holding property in a dt costs you more for land tax in nsw than if holding in your own (or spouses) name.
 
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This trust thingy is really a risky business, depends on how it's set up, often the accountants/solicitors don't really fullymnunderstand the inside out/implications themselves (or just want the money). I was told by my accountant that the HDT can now be used just as a regular DT, feel like you are asked to drive a car blindfolded, and the instructor doesn't really know how to drive this monster call trusts, you don't know there's an accident until you smash into a wall.

I am constantly frustrated by lawyers and accountants that don't understand the others profession. Some legal advice can really be expensive from a tax point of view!
 
Many lawyers just get through the "equity & trust" sections of their courses dreaming of being a telefilm lawyer.
No different to other sections of society really where only a small % really enjoy what the do and take pride in being good at it.
 
Smitty

that link probably refers to a case known as Richstar in 2006 Richstar Enterprises Pty Ltd v Carey (No.6) [2006] FCA 814). Subsequent legal cases have rejected or no followed Richstar:

see

Kawasaki (Australia) Pty Ltd v ARC Strang Pty Ltd [2008] FCA 461
(under a discretionary trust, no beneficiary under it has a vested interest)

and

ASIC v Burnard [2007] NSWSC 1217
http://www.lawlink.nsw.gov.au/scjud...15560b0a474a6832ca2573830018e17e?OpenDocument
(ASIC sought injunction restraining dealing with trust assets, but assets of the trust were not deemed to be asset of the person)

and

Public Trustee v Smith [2008] NSWSC 397
http://www.lawlink.nsw.gov.au/scjud...4DE829E369881E6FCA25743B0017D5DA?OpenDocument
(Sole director of trustee, sole shareholder of trustee and beneficiary of trust not beneficial owner of trust property)
 
I often question the much asset protection a trust really provides
http://www.findlaw.com.au/article/14912.htm

and i suppose its a risk one needs to take when setting these up - Still need to seek good advice from your solicitor .

A discretionary trust has very good asset protection, so long as the directors of the trustee are not fraudulent or negligent in their role of same. Unit and hybrid trusts, much less so. That's part of the trade-off.

And yes, legal advice should always be sought when establishing legal structures. That should be common sense but still worth pointing out.
 
I've thought about eventually having a trust that holds separate companies. Each company owns a separate property, that way, in the worse case scenario a company I control can be sued and the property belonging to that company could be lost, but other properties would still be controlled but not techinically owned by me.

I know this may sound like overkill and at this point it is completely hypothetical. I eventually plan to be a property man and to do this as a full time wealth creation process. So my question is, would this kind of business/investing architecture be necessary to have from the get go? Or is it something I could install later without much cost? As in, could I transfer a property out of my name and into a company without paying tax or violating any laws?
 
I know this may sound like overkill and at this point it is completely hypothetical. I eventually plan to be a property man and to do this as a full time wealth creation process.

Hi, yes, sounds like overkill. How much property do you honestly expect to own and what risk do you see yourself being subject to?


So my question is, would this kind of business/investing architecture be necessary to have from the get go? Or is it something I could install later without much cost? As in, could I transfer a property out of my name and into a company without paying tax or violating any laws?

No, transferring a property out of your name into another entity will incur both stamp duty and capital gains tax based on market value at time of transfer. So yes if you decide that this type of layered structure is absolutely necessary then you would want to establish it before buying anything or just leave the initial properties wherever you put them to begin with.
 
I've thought about eventually having a trust that holds separate companies. Each company owns a separate property, that way, in the worse case scenario a company I control can be sued and the property belonging to that company could be lost, but other properties would still be controlled but not techinically owned by me.

I know this may sound like overkill and at this point it is completely hypothetical. I eventually plan to be a property man and to do this as a full time wealth creation process. So my question is, would this kind of business/investing architecture be necessary to have from the get go? Or is it something I could install later without much cost? As in, could I transfer a property out of my name and into a company without paying tax or violating any laws?

Its not good to own in a company as you won't get the 50% CGT reduction. it would be better to use a trust, and maybe one trust for each property with one company as trustee - ie same trustee for each trust. This would be cheaper, and depending on which state you are in it may not cost much to set up separate trusts.
 
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