I'm not sure what S302B is trying to say Terry, are you able to explain in lamens terms?
It means that any Trust provision which seeks to exclude or reduce a beneficiary's interest in the Trust due to bankruptcy is void.
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I'm not sure what S302B is trying to say Terry, are you able to explain in lamens terms?
I'm not sure what S302B is trying to say Terry, are you able to explain in lamens terms? My accountant has advised that this is possible as the Property Investor Trust Deed is drafted this way. And as far as I'm aware there are product rulings for the PIT that allow this?
This whole thing is just going around in circles - the accountant refers me to the solicitor, the solicitor refers me to the accountant. I think I may need to get a second opinion from another solicitor.
ps, aren't trusts so much fun?
The company wouldn't own the trust but would act as trustee.
There are two aspects of asset protection to consider. 1. The trustee is sued and 2. A beneficiariary of unit holder is sued.
1.
A trust cannot be sued as it is not a legal entity. It would be the trustee that is sued. for example say you didn't have smoke alarms in the property and a tenant died during a fire the owner of the house is the trustee so it would be the trustee that is sued. The trustee would be indemnified out of the trust assets so the trust assets would be at risk. If the trust assets are not enough to cover the action then the trustee's personal assets are at risk. This is why you shouldn't be trustee but to use a $2 company.
(incidently they may also be able to go after the director in many cases)
2. If a beneficiariary or unit holder is sued then their personal assets will be at risk. Units in a unit trust are considered property so they can fall into the hands of the trustee in bankruptcy.
But if you have a discretionary trust then a beneficiary has no property in that trust or assets of the trust (depending on the deed). So if a trustee in bankruptcy does take over your affairs then all they have is a right to be cosnidered by the trustee for a distribution. The trustee doesn't have to distribute to them however. So this is where the asset protection comes in.
It is possible to hold your units vi a discretionary trust for asset protection, but then you may not get the land tax exemption or be able to personally claim the interest on the loan.
Holding units in a unit trust can add some limited asset protection over and above owning in your own name but it is not great.
Terry,
I am still not sure in part 2 above this offers any protection as the trustee of the discretionary trust will have to be an individual or a company that has directors as individuals. This essentially means the assets of these individuals come under scrutiny in the event of bankruptcy or litiguous matters.
Asset protection is often an over complicated vehicle that is rather complex and ill-advised.
I received a letter from Macquarie Group Services today asking me to consider converting my Hybrid Discretionary Trust to a Land Tax Unit Trust. Yes there would be significant land tax savings but I'm not sure I'd be better off using an LTUT in the long term?Convert the Unit Trust to a Land Tax Unit Trust before 31 December,
Should I be converting to a Land Tax Unit Trust instead?
No, I only have one property in my own name and it is well within the tax free threshold. The other IP's are in the Hybrid Trust and are charged land tax from the 1st dollar.Would depend on your circumstances.
For example have you already used up your land tax free threshold?
No, I only have one property in my own name and it is well within the tax free threshold. The other IP's are in the Hybrid Trust and are charged land tax from the 1st dollar.
It would cost $2.2K for the conversion but save $2.8K p.a in land tax each year. No CGT or stamp duty consequences.Now you should work out how much it would save you in land tax each year and then the cost of converting over. Compare costs v benefits.
Any CGT or stamp duty consequences? (I think they may have rulings??).
With a unit trust the trustee has the ability of redeem units. But with a fixed unit trust that qualifies for the land tax threshold in NSW I don't think this is possible. An alternative is for the units to be sold to a discretionary trust. Virtually the same thing, but slightly less asset protection perhaps.
It would cost $2.2K for the conv srsion but save $2.8K p.a in land tax each year. No CGT or stamp duty consequences.
I've just read somewhere that a 'sole trustee of a unit trust may be one of its unit holders but not the only one'. Does this apply to Land Tax Unit Trusts? I'm the sole trustee of my HDT and hold 100% of the Special Income Units.