Pros and cons of buying property thru trusts pls what do u personally do pls .

Do u buy property thru trusts pls?

I don't want to regret later either way .

I've read some other threads on trusts .
Some say it's assert protection
some say it won't really protect ur asserts.
Some regret not buying thru trusts and want to change ut
and skater said the opposite she regreted buying thru trusts and chaned ut back to their own names.

It's meant to help re protection and accounting purposes

And yet I've heard others say to keep it simple and buy in own name not thru trusts .
Pls can u tell me more if ur own opinions knowledge experiences . Thanks .
 
It really is a decision based on personal circumstances.

From an asset protection perspective a discressionary trust can be very useful. The reality for most people is that they generally don't need much in the way of asset protection aren't at risk of litigation unless they do something stupid (hard to really say, but you need to analyse your own risk).

Trusts can definitely be flexible for tax purposes. The catch is the investments held in the trust has to be positively geared to take advantage of this. The opportunity for negative gearing is limited.

Using a trust can mitigage land tax liabities somewhat. It depends on how much property you buy and where.

Trusts work very well for many people who are self employed. People in this category tend to have more flexibility of income and potentially greater liability than people who are PAYG employed.

Also keep in mind that using a trust has inherant costs involved. Setup costs, ongoing registration and accounting costs.

To properly make a decision on this, I'd suggest getting advice specific to your circumstances. Asking for other peoples experiences will give you some ideas, but it they may not be relevant to your circumstances.
 
Pros and cons of buying property thru trusts pls what do u personally do pls .


Personally, we have bought the last 2 properties with 2 different trusts.
Sorry, can't give you pros and cons because don't know the reasoning.
I imagine it's to do with asset protection as we operate a business, that's all I know.
Keen to hear more from others too.
 
Do u buy property thru trusts pls?

I don't want to regret later either way .

I've read some other threads on trusts .
Some say it's assert protection
some say it won't really protect ur asserts.
Some regret not buying thru trusts and want to change ut
and skater said the opposite she regreted buying thru trusts and chaned ut back to their own names.

It's meant to help re protection and accounting purposes

And yet I've heard others say to keep it simple and buy in own name not thru trusts .
Pls can u tell me more if ur own opinions knowledge experiences . Thanks .

Currently, it is harder to find finance for HDT's.
 
Using a trust can mitigage land tax liabities somewhat. It depends on how much property you buy and where.

Not in NSW. You get NO threshold whatsoever and the Land Tax component was one of the reasons that I sold them to myself.:(

Trusts are not a bad thing, but you need to be educated on their use before jumping in. At one stage, it seemed like every man and his dog was using Trusts because it was "the thing" to do at the time, without really assessing if they were the correct vehicle to use at the time.

For the record, I didn't change ALL properties back to my own name. The costs were quite high to do this. I sold two out of three that were costing me a large amount. The Trust was set up for positive geared properties, and like a fool I added three Sydney neg geared properties. The costs of holding were way too high (no neg gearing benefits) combined with a very nasty Land Tax bill each year.
 
What I've been told is a trust can protect your assets as you do not own the property - the trust does. So for example, if you get sued and go bankrupt, the bank can't take your IP because you don't own it, it's in the trust which is controlled by a 'party'. Please correct me if I'm wrong as I'm still learning also :)
 
What I've been told is a trust can protect your assets as you do not own the property - the trust does. So for example, if you get sued and go bankrupt, the bank can't take your IP because you don't own it, it's in the trust which is controlled by a 'party'. Please correct me if I'm wrong as I'm still learning also :)

A FAMILY trust does provide come asset protection against creditors, but, for example, may not protect against Family Court judgements. A unit trust, on the other hand, may not provide asset protection.

If you don't understand trusts, don't use them.
 
I prefer to invest using the KISS philosophy. As such we invest in sole name as well as for financing reasons in line with our CGA investment strategy.
 
What I've been told is a trust can protect your assets as you do not own the property - the trust does. So for example, if you get sued and go bankrupt, the bank can't take your IP because you don't own it, it's in the trust which is controlled by a 'party'. Please correct me if I'm wrong as I'm still learning also :)

This is not really correct.

A trust can't own property. A trust needs a trustee and it is the trustee that owns the property. The trustee could be you, a person, or a company (or both). But the trustee only owns the property legally - the true owners are beneficiaries.

The easiest way to understand this, I think, is with children's bank accounts. A 2 year old can't operate an account, so the mum may open an account for the kid. The mum would be trustee and legal owner with her name on the account, but it is not her money as it really belongs to the kid who is the beneficiary.

If someone goes bankrupt, their assets (or whats left of them) go to a trustee in bankruptcy who then sells them to pay out creditors. Assets held on trust are not your assets and the Bankruptcy Act says that the they are not available for creditors. That is, trust assets are not considered property and won't be able to be sold.

So if the mum from the eg above goes bankrupt, her kids account will not be able to be touched by the trustee in bankruptcy.

So far so good, but what if the kid grows up and becomes 18 and she goes bankrupt - in this case the money is in the mum's name, but the kids is the ultimate owner so it will be the kids property and it will become available to creditors.

The way around this is to make sure your trust is a discretionary trust (DT). With a DT the trustee owns the property, but the true owners, the beneficiaries are a large group of people. None of these people can be considered owners as the trustee has discretion (depending on the deed) on who to give income to each year. That way no one person has a claim, no one can demand money (unlike the kid in the above example, which would be a bare trust). So if a beneficiary of a DT were to go bankrupt the assets of a DT could not be taken as they have no claim on those assets.

This is well know and has been abused a fair bit, so over the years there have been amendments to the Bankrupcty Act etc so that in some instances assets held in trust can be attacked.

One is if you were to sell or gift or divest your assets to a trust (or anyone) just before you become bankrupt. In many instances these transactions can be reversed, especially if the transfer was done at under market value, or done with the intention of defeating creditors. This also includes gifting money to your trust or anyone's trust.

Another way trusts can be attacked is if you run or offer services to a trust and the trust does not pay you for those services.

Mortgaging to a company or your trust can also be reversed as can the use of options, leases, contracts etc.

So asset protection is not as simple as buying a property in a trust - you need to carefully plan how the trust is going to be run, who is going to operate it, who is going to gift or lend money to it and how you are going to do this.

Then you have to consider all the other aspects of operating a trust such as the tax side - especially if there are losses. The state revenue taxes aspect such as stamp duty and land tax as well as all the legal issues such as trustee duties and obligations and even the corporations act stuff if you are operating a company as trustee.
 
Hi Terryw ,

To what extent is it harder to obtain finance via a trust and can you still get high LVRs (like 90/95%?)

Thanks
 
Hi BrianB

I am not up to date with the info, but in the past some banks and some types of loans were not available at all to trusts. More recently this has been the case with bankwest loans and low doc loans. Having a company as trustee may also mean your loan goes from residential to the commercial section of the bank.

The bank will also want to make sure the trustee is able to borrow under the terms of the trust, so they will want their legal people to review the deed - or get your lawyer to sign something to this effect. This means more fees and more hassle.
 
What I've been told is a trust can protect your assets as you do not own the property - the trust does.

I read similar things from an accountant who used to post here a few years ago. He spruiked about HDT's a lot so I went to see him and he said similar things to your quote above. I should have researched and understood more before paying him ~$3,000 to set up for me but I was in a hurry to get the ball rolling.

I now buy in my personal name and have sold all assets that were previously held in the 2 trusts with a corporate trustee. The company has also been deregistered. A trust structure is overkill for my situation being single with no dependents and "retired". Yes the accountant should have mentioned the same to me but I guess he was keen on selling them at the time so he could retire early.
 
Buying in a Group, Is a Discretionary Trust (DT) the way to go

Hello,

A group of us including family and friends are looking to buy property for a holiday house and wondering the best way to set up the owner ship,

It will be a group of 6 people. most of the group will still be seeking some finance for there share. which may complicate things.

What is our different options? From reading the above post the DT seem a possible option, Or is a family trust a good idea? is there lots of different type's of family trusts? Does everyone need to be a family member to be part of a family trust?

We still want it set up so if one owner goes bankrupt the property is safe, Also needing some sort of contract written up so everything is on paper about ownership incase of possible family arguments in the future.

Can someone put me in the right direction of possible ways to set up a purchase like this. Im trying to do more research but unsure of the name of loans i should be researching.

Thanks in advance
 
Buying in a Group, Is a Discretionary Trust (DT) the way to go

Definitely not!

This is because the trustee controls who benefits from the trust. If the trustee is a beneficiary or controls a beneficiary then one or more of the group could miss out completely. No one has any fixed entitlment.

This is legal advice.
 
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