Starting a Trust

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From: Anonymous



When you start off a discretionary trust it doesn't have any capital (except a nominal amount). So what happens if you want to buy a property and need a deposit. Can I personally lend money to the turst.
eg. $100,000 property, the bank will lend $75000 so I need $25000 deposit plus costs. Do I just use my money or do I have to make some record of lending it to my trust?
 
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Reply: 1
From: The Wife


Dear anon,

If theres one good piece of advice I can give you regards this matter, its, RECORD, RECORD, RECORD, and check it all with your accountant.

Your on the right track !

Cheers, TW
~Life is a daring adventure, or nothing at all~
 
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Reply: 1.1
From: Sergey Golovin


Generally speaking you certainly can do it, if we are talking about big money.

If we are talking about $100K only, is it worth it?

All charges will outweigh all the benefits.

They will tell you to pay $9-10K in charges and you will save nothing at all.

But if you would've done in your own name you might have few $K refund at the end of the year.

If you do think about trust for future transaction I think you have to pay higher tax on it then individual.

Because we do not know your name or all circumstances, please do us a favour check it with your friendly tax accountant.

Serge G.
 
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Reply: 1.1.1
From: Paul Zagoridis


$9K-$10K? There is no way a trust structure should cost that much extra over owning it privately. More likely $2-3K to set up and $1-2K per annum (including a corporate trustee).

But if that property is the only one the trust will ever own then it is not worth it.

Trusts are not tax planning vehicles. They are estate planning and asset protection vehicles that happen to provide some interesting tax measures.

To Anon's question... A Bank will lend the trustee money as trustee for the trust, taking some sort of charge over its assets. They will also insist on a personal guarantee from the income earner (Anon).

Anon will lend (and document) the deposit money to the Trust and can charge interest on that money. But Anon can also charge for the guarantee, loss of borrowing capacity, etc, etc,

Dreamspinner
 
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Reply: 1.1.1.1
From: The Wife


This is why I love you Paul,

You are so succinct!

TW :eek:)
~Life is a daring adventure, or nothing at all~
 
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Reply: 1.2
From: Dale Gatherum-Goss


Hi

Trusts are wonderful vehicles to use towards wealth creation and protection. They have been around since the days of the crusades - see earlier posts a couple of weeks ago now.

Yes, you can legitimately loan money to your own trust so that it has capital to use towards buying IP's.

In fact, if you do it properly you can remove the cross security that the banks will try to use against your other assets and this makes the trust even more powerful.

A trust will cost you about $1,500 or so to establish and no more than that each year to operate if you are competent with your own record keeping.

I hope that this helps

Dale
 
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Trusts

Reply: 1.2.1
From: D R


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Hi There,

Is there any point to setting up a trust unless you have income
(Positive/Structured gearing) producing assets to put in their?


Thanks

Darren
 
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Trusts

Reply: 1.2.1.1
From: Paul Zagoridis


I personally think there is benefit in a trust wherever you have an income producing asset AND plan to grow that asset base.

It doesn't matter if the asset is positive cash flow or negative geared (!).

Although there are valid arguments for keeping some -ve geared assets in personal names for tax planning.

But what do you want to achieve long term? If you eventually want to quit your job then you eventually want cash flow positive investments. If your want a lot of them then you'll need to structure.

Dreamspinner
 
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Trusts

Reply: 1.2.1.1.1
From: Sergey Golovin


$9K would be = (as Paul said) $2K to set it up (the trust) + $1k to run + (?) $5K ? Buy that property + $1K Conveyancing + $(?)K Insurance +.....+ as Darren said would be nice to have that property (at least first one) positively geared (we are talking about trust structure) = probably then it would make sense.

$100K ? Ye, well, what can you do with 100 this days? What do you want to buy? And where? Do you have a deposit?

We are running out of options...

Do not seat there and wait for us to tell you everything...

Common Anonymous be fair, give us more info to play with!!

Serge G.
 
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Reply: 2
From: D R


Hi there,

What you normally do is setup a trust with a corporate trustee.

You are the director for the company who is acting as the corporate trustee.

When the trust wants to buy an IP you will go guarantor to the company, the company the goes guarantor to the trust and walla, you have an IP.

Basically whatever you can afford to borrow as an individual is what your trust can afford to do.

A company/trust structure costs about 2k to setup.

I belive the assets are bought in the trustees name so the trust remains anonomys.

However, no point having an asset that doesn't provide a positive income. If your trusts is not making a profit and can't afford to pay the mortgage then becasue youv gauranteed the whole thing they will come after you and your assests.

Well, something like that anyway. Hope that helps a little.

Cheers
Darren


DR
 
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Reply: 2.1
From: Tom Cleary


I've just set up my own DIY super fund using a local guy and the fee structure they gave me is (hope it pastes ok)
Regards
Tom
CURRENT FEE SCHEDULE (as from 1" March 2001)

Shelf companies (your choice of name and number of directors)$940.00
Shelf company and a discretionary trust (excluding stamp duty) $1,000.00
Shelf company and a unit trust $1,000.00
Shelf company and superannuation fund $1,100.00
Private company loan agreement $ 160-00
Discretionary trusts (excluding stamp duty) $160.00
Unit trusts $160.00
Hybrid Trust $160.00

Superannuation fund (includes full register) $250,00
Superannuation fund deed amendments $170.00

Single director conversions$120.00
Company searches $30.00

Note. All prices Include G.S.T.
 
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