Recommendations for Family Trust, and cost?

[monalisa]

Hi all!

We are looking to set up a family trust, and wondering if you have recommendations on who to use, and how much did it cost?

We do want a well drafted deed - which defines income well, has the potential to stream income (as we may acquire asset classes other than property) etc, and has the relevant asset protection clauses.

We are also looking at setting up a corporate trustee, and will do it through Corporate Express.

Many thanks
Mona

 

[o0o]

I would recommend not to go down this path and keep things simple by investing in personal name. If you do a search and read the threads relating to trusts you will find a lot of posts from people who have been paying high amounts to set these up and maintain them but later find they can't offset capital losses. A few accountants were spruiking these on property investing forums a few years ago and made a lot of money selling them but I have come to the conclusion they are overkill for the average investor who accumulates a few million dollars worth of assets.

 

[monalisa]

I have come to the conclusion they are overkill for the average investor who accumulates a few million dollars worth of assets.

I don't intend to be the average investor, hence the question

Thanks for your input though

 

[o0o]

I don't intend to be the average investor, hence the question

Thanks for your input though

Best of luck with it but I don't think these structures are worth the time and cost unless you have $10+ million worth of income producing assets or work in a litigious field such as obstetrics. If you want to go down this path you will find many use trusts from Chris Batten.
Found this link:
http://www.propertytaxspecialists.com.au/what-we-can-do-for-you/asset-protection

 

[devank]

TerryW from here does it.

Last week I have completed setting up a Trust (trading trust) and a company (trustee company). That is for a very small business not for IPs. We are still planning to keep IPs under our names for the time being.

 

[Aaron_C]

I don't intend to be the average investor, hence the question

Thanks for your input though

No, his point is that if you are PAYG and have a few million of assets it's not really worth the time. Also it gets more expensive not just to maintain the set-up but trusts need time to review by banks and most charge for that as well. Time and money are very valuable commodities - time moreso once you've accumulated the big numbers.

 

[monalisa]

TerryW from here does it.

Last week I have completed setting up a Trust (trading trust) and a company (trustee company). That is for a very small business not for IPs. We are still planning to keep IPs under our names for the time being.

Devan, do you mind sharing how much it cost you all up? I might check Terry's website

No, his point is that if you are PAYG and have a few million of assets it's not really worth the time. Also it gets more expensive not just to maintain the set-up but trusts need time to review by banks and most charge for that as well. Time and money are very valuable commodities - time moreso once you've accumulated the big numbers.

Yeah, this is one of the considerations. Not keen on getting cash flow IPs in personal name - but of course has to have substantial return to be worthwhile.

 

[devank]

Devan, do you mind sharing how much it cost you all up?

Sent a PM (internal email).

 

[monalisa]

Sent a PM (internal email).

Hi Devan

I haven't received it.

ta
Mona

 

[Terry_w]

It will cost you from nil to around $2,000 to set up an average trust.
Stamp duty in NSW is $500 as well - assuming a nominal sum settled.

You should get some legal advice on trustee duties, who the trustee should be, structure of the trustee, role and control of appointor, succession of the trust (don't form part of your estate and not covered by your will). Asset protection will depend on the structure of the set up, and how it is operated. You should also consider the borrowing aspects - no good setting one up only to find it impossible to get finance.

Also consider land tax and stamp duty issues.

And, consider if it is suitable for your situation. It can be very costly to own property via a discretionary trust, especially in the early years.

 

[monalisa]

It will cost you from nil to around $2,000 to set up an average trust.
Stamp duty in NSW is $500 as well - assuming a nominal sum settled.

You should get some legal advice on trustee duties, who the trustee should be, structure of the trustee, role and control of appointor, succession of the trust (don't form part of your estate and not covered by your will). Asset protection will depend on the structure of the set up, and how it is operated. You should also consider the borrowing aspects - no good setting one up only to find it impossible to get finance.

Also consider land tax and stamp duty issues.

And, consider if it is suitable for your situation. It can be very costly to own property via a discretionary trust, especially in the early years.

Thanks Terry.

What would an average trust include? And what would be the benefit of getting a not so average trust, and as a result pay a bit more?

 

[Aaron_C]

What would an average trust include? And what would be the benefit of getting a not so average trust, and as a result pay a bit more?

An 'average' trust is just one off the lawyer's shelf that is the standard form - all they do is just Ctrl+F to change the name/ACN of the company trustee and the beneficiaries. These trusts usually have basic provisions which allow the most common things you will ever need with a trust like the power to borrow money, distribute incomes etc.

You would need to modify this (and pay more) if there are additional things you require that fall outside the scope of the 'off the shelf' type one. This could be required for things that involve other 3rd parties like joint ventures etc where the rights of each party has to be more protected and spelt out more specifically.

 

[handyandy]

We are also looking at setting up a corporate trustee, and will do it through Corporate Express.

Many thanks
Mona

Seems from your original post that you are planning to go the DIY route.

Just looked at their site and they also do trusts.

Cheers

 

[Rolf Latham]

I have come to the conclusion they are overkill for the average investor who accumulates a few million dollars worth of assets.

my experience is that at a few mill exposure a properly designed and structured Portfolio a DT for Self employed ( or a HDT for PAYG for those with enough equity to run 80% lends) work pretty well

A few mill of net value even more so

I do however agree that it is very important to assess what you are doing and why, and in many instances a trust is overkill and not warranted based on CURRENT circumstances

PS, im neither a soli or a tax guy

ta
rolf

ta
rolf

 

[shuggy]

I would also avoid setting up trusts with corporate trustee because of the cost and time hassle factor but would contact Terry if you want to proceed. No point setting up something half baked which will create headaches down the track. Do it once, do it well.

 

[Terry_w]

Thanks Terry.

What would an average trust include? And what would be the benefit of getting a not so average trust, and as a result pay a bit more?

Don't know what an average trust would include.

If we are talking discretionary then

It is not just the deed but how it is set up that is important. Things such as who does what role.

If you put your grandma down as a beneficiary, for example, she may lose her pension. If you put your accountant down as appointor he may sack your trustee and put a trustee he controls in. If you put yourself down as trustee and are a beneficiary too and later change the trustee stamp duty may be payable on the whole trust assets.
Do you want an appointor and a controller? Should decisions be made jointly? Should the controllers approval be required for certain major decisions ?

But the wording of the deed is important too as it needs to take into account:
Income tax and both ITAA97 and ITAA36
Definition of income etc
FBT and FBT Act etc
GST
Family Law
Succession Law
Trustee Act
Trust common law
Law of perpetuities
Asset protection
Default beneficiaries
Corporations Act
ATO requirements
Property Law
Stamp Duty
Land Tax
Beneficiary rights
Trustee duties
Trustees ability to be indemnified out of the trust assets
Capacity issues - what if the trustee gets dementia?
Administration of the trust - can trustee employ advisors?
Investments - can trustee invest in xx, are they restricted in investing
Mortgages - does trustee have the power to mortgage assets of the trust
Trustee powers in general - can they sell assets?
Ability to amend - can the deed be amended? Who can do this?
Distributions - what counts as a distribution, what about minors
Loan accounts - can a trustee retain a distribution on a sub trust? Div 7A issues
Minors - who to make a distribution for a minor to?
Resolutions - how should be done and when by
Trustee benefits - can the trustee be paid a fee for their services? (may be good for asset protection). Can a trustee benefit. What if there is a conflict of interest - such as trustee selling property to the trust or trust selling to trustee.
Ability to issue units down the track - trust could convert into a partial unit trust if need be.
Do the trust have the power to accumulate income?
The effects of naming beneficiaries

etc etc

Unit trusts also have many issues. Do you need a fixed trust for land tax purposes. Will as NSW fixed trust work for VIC land tax thresholds? What if the unit holder is a trustee of a discretionary trust.
What if the trust has a loss one year - can if be carried forward. Will the trust survive?
Do the trust have the power to accumulate?

 

[DaveM]

will do it through Corporate Express.

Don;t they sell stationery?

 

[coastymike]

Agreed with the other posters. A trust isn't for everyone. But as a summary

Advantages of Trusts (unit trusts in particular) over personal names

1. Land Tax Exemptions if structured properly
2. ability to move asset into super at a later stage
3. negative gearing (well same as personal names)
4. refinancing principle

Disadvantages

1. Higher setup costs
2. Higher ongoing costs
3. Higher loan costs

So it is important to work out what is a priority and most of these are longer term. So if you are a short to medium term investors then holding in your own name may be better suited.

 

[coastymike]

Did you also know that most online deed providers contains clauses where you waive all rights to make a claim against them when you purchase their deed. Many don't know this. Click submit and waive your rights. Sounds great

 

[Terry_w]

So if you are a short to medium term investors then holding in your own name may be better suited.

I had a friend a few years ago who was on a good salary, top tax rate. His wife was a stay at home mum with no income. He was looking to purchase a property in the booming WA market. I advised him to look at setting up a discretionary trust. But he wanted to claim losses from negative gearing.

He bought in his own name and then the property doubled in value within 12 months. So he sold making about $250,000 in profit. All of this went up top of his other income (after 50% discount etc) and he paid about 1/4 in tax while his wife still had $0 annual income.

If he had used a trust he could have distributed the lot to his wife and reduced the tax payable by a considerable amount.