Tenant in Common between myself and Unit Trust

[Roomer]

Does anyone know if it would be relatively easy (or possible) for me to form a tenant in common relationship between myself and a unit trust (in which I hold an interest) with regards to an IP already owned by me and held in my name?

My thoughts are that I could sell off some of my ownership in the IP to the unit trust such that I can trigger the CGT in instalments rather than in one hit.

If allowable, this would permit say, one of my children to progressively get a toehold into property investing, with me realizing some gains but not at all at one go.

It would also allow me at some point to gift a portion of the ownership (and of course this would trigger CGT) rather than giving it over at one go.

I would think that this should be possible and that SD costs etc would be based upon the proportion of the value of the property transferred, but would be interested if anyone has knowledge of this.

 

[alexlee]

Does anyone know if it would be relatively easy (or possible) for me to form a tenant in common relationship between myself and a unit trust (in which I hold an interest) with regards to an IP already owned by me and held in my name?

My thoughts are that I could sell off some of my ownership in the IP to the unit trust such that I can trigger the CGT in instalments rather than in one hit.

Why a unit trust?

If allowable, this would permit say, one of my children to progressively get a toehold into property investing, with me realizing some gains but not at all at one go.

Who would own the units?

It would also allow me at some point to gift a portion of the ownership (and of course this would trigger CGT) rather than giving it over at one go.

You're not gifting since it's a CGT event. Also, who will control the trust?

 

[Terry_w]

Yes. it is possible to gift or transfer part of a property you already own to a unit trust. CGT and stamp duty on the amount transfered or the market value of the amount transferred.

Whether it is a good idea or not is another question.

 

[Roomer]

Gday Alexee,

Unit trust allows me the option to have my other children involved at a later date if they were interested.

I thought I could gift it ie not receive money but of course be liable for CGT

The Unit trust is empty ( had been set up by me for an IP that has been sold and so it is just the entity) so whoever subscribes into the trust and has the higher number of units would control the trust.

By that question of yours , it would appear that I could not theoretically be a unit holder in the trust (not that I'd want to or see any advantage to doing that)

 

[Roomer]

Whether it is a good idea or not is another question.[/QUOTE]

well I thought it;d be a good idea for the reasons mentioned and as an after thought , in the right circumstances you could make a taxable contribution into super and trade off the equivalent CGT that would be triggered by some of the transfer of units ?

 

[Terry_w]

Whether it is a good idea or not is another question.

well I thought it;d be a good idea for the reasons mentioned and as an after thought , in the right circumstances you could make a taxable contribution into super and trade off the equivalent CGT that would be triggered by some of the transfer of units ?[/QUOTE]

Transferring will result in CGT and Stamp duty. You also have to consider other aspects such as if you gift there will be no deductibility of interest on any loan on the gifted portion.

If children owned units then they could deal with them, subject to the trust terms, mortgaging or charging them, selling them, gifting them. Think about the family law aspects if divorce. Also consider death - yours and theirs. Trust assets cannot be left via a will, but units can. Think of asset protection in death - challenges to wills, invalid wills, intestacy laws and asset protection in life - bankruptcy.

Also consider future serviceability, current loan issues - will a loan be needed, who will need to guarantee the loan? Further asset protection issues.

many things to consider. I am not saying it is a bad idea, just that you need to consider the many different issues - about 11 or 12 different issues.

 

[Roomer]

Thanks for those comments Terry. Also like your precis on your other post re property ownerships

well I thought it;d be a good idea for the reasons mentioned and as an after thought , in the right circumstances you could make a taxable contribution into super and trade off the equivalent CGT that would be triggered by some of the transfer of units ?

Transferring will result in CGT and Stamp duty. You also have to consider other aspects such as if you gift there will be no deductibility of interest on any loan on the gifted portion.

If children owned units then they could deal with them, subject to the trust terms, mortgaging or charging them, selling them, gifting them. Think about the family law aspects if divorce. Also consider death - yours and theirs. Trust assets cannot be left via a will, but units can. Think of asset protection in death - challenges to wills, invalid wills, intestacy laws and asset protection in life - bankruptcy.

Also consider future serviceability, current loan issues - will a loan be needed, who will need to guarantee the loan? Further asset protection issues.

many things to consider. I am not saying it is a bad idea, just that you need to consider the many different issues - about 11 or 12 different issues.[/QUOTE]

 

[Paul@PFI]

Word of warning - Beware of the problem of "merger". You could trigger a much larger tax problem and 100% of the property would be personally owned. This is a very good example of why DIY trust management can fail. Most accountants dont know what merger is and couldnt pick the mistake.

 

[Paul@PFI]

Gday Alexee,

Unit trust allows me the option to have my other children involved at a later date if they were interested.

I thought I could gift it ie not receive money but of course be liable for CGT

The Unit trust is empty ( had been set up by me for an IP that has been sold and so it is just the entity) so whoever subscribes into the trust and has the higher number of units would control the trust.

By that question of yours , it would appear that I could not theoretically be a unit holder in the trust (not that I'd want to or see any advantage to doing that)

Have you given thought to kids interest held on trust in a DT that has you as trustee ??? I raise this for discussion ... Terry & Co? There is a practical issue that such a transfer cant be stamped in some cases. Asset protection etc ? Maybe some land tax issues in some states.