I have a small amount of money which I plan to put in to shares and am looking at setting up a trust to handle this. I just want to make sure I understand correctly how it works. I am setting up the trust to have a structure to protect the assets, for I would like to go in to business down the track (1 to 5 years from now) and would like to protect the little I do have. I also want to leave as much flexibility as possible. I would like the option of being able to use the money to buy a house which would probably be under my wife’s name.
I am planning to get a trust set up with a shelf company as a corporate trustee, how much is this likely to cost, I expect about $1500.
To transfer money in to a trust, you can gift the money or loan the money. Is these the only two ways?
If you gift the money then there is a good separation between you and the assets. If you loan the money then you still have a link, is there any issues with having a 0% interest rate? With loaning money does this work, since a trust must distribute profits, so Income – expense = profit, then increasing expenses would reduce the profit to potentially zero. Is repaying a loan counted as an expense to be able to reduce the profit, is getting capital back counted as income to me.
Example:
Loan trust 10k
Trust makes 1k in the year, and pays back 1 k of loan
Loan is now 9k, has 10k of assets, 0 profits
I have 1k returned of capital, I know if it was interest it would be counted as income, but capital being repayed should not be?
I then loan/gift the money back to the trust
Trust has 11k of assets and a 10k loan.
If I did want to get money out of a trust latter to buy a house, the only ways that I can think of is that the trust loans the money, or repays a debt?
Thanks for any advice or suggestions
I am planning to get a trust set up with a shelf company as a corporate trustee, how much is this likely to cost, I expect about $1500.
To transfer money in to a trust, you can gift the money or loan the money. Is these the only two ways?
If you gift the money then there is a good separation between you and the assets. If you loan the money then you still have a link, is there any issues with having a 0% interest rate? With loaning money does this work, since a trust must distribute profits, so Income – expense = profit, then increasing expenses would reduce the profit to potentially zero. Is repaying a loan counted as an expense to be able to reduce the profit, is getting capital back counted as income to me.
Example:
Loan trust 10k
Trust makes 1k in the year, and pays back 1 k of loan
Loan is now 9k, has 10k of assets, 0 profits
I have 1k returned of capital, I know if it was interest it would be counted as income, but capital being repayed should not be?
I then loan/gift the money back to the trust
Trust has 11k of assets and a 10k loan.
If I did want to get money out of a trust latter to buy a house, the only ways that I can think of is that the trust loans the money, or repays a debt?
Thanks for any advice or suggestions