Trust Deeds

[monoply]

Hi,

Ive been looking into trust set ups a bit.
I have been recommended to use a high profile solicitor in Melb, by people I have ut-most respect for.
They tell me I should have a trust with its own written constitution. They also say that solicitors like this can take off the shelf trusts to the cleaners.
The fee for this solicitor would be $5500 for a trust set up with a corporate trustee.

On the other had I have had people tell me, that they have had trust deeds written up for $300, which are as good as any.

So I guess the question is, are all trust deeds as good as each other?
What should a good one include?
Is there anywhere you can view and compare trust deeds?

This is a decision I need to get right.
Some people say you can set up a cheaper trust, and then re do it later when you can afford more, although I realize if there are property sales involved, that is not an option.

The price of trust structures vary so much, and everyones opionion is different, so Im looking for guidance.

Cheers
mono

 

[Aceyducey]

Monoply,

You don't need a 'high profile' solicitor.

You need a good accountant.

In Melbourne see Dale Gatherum-Goss - he's been recommended in other threads plenty of times & is a regular forum contributor (plus his Trust Magic book will tell you a lot about how they work).

You should not need to pay more than a couple of thousand for a Trust & Corporate Trustee structure.

Cheers,

Aceyducey

 

[Beach Bum]

Setting up a trust is a legal matter, which of course accountants can help with.

Q. If the trust deed is a standard deed that they use for everybody, why pay more for the profile?

from www.chrisbatten.com :Trust deeds 1,100.00, Companies 1,650.00, (memeber less) so any more depends on what specific legal or financial advice you need.

 

[quiggles]

Monopoly,

The advice you got is (IMHO) about half right. The trust deed is very important - it limits what you can do and permits various things.

They key is to have a document which will be largely off-the-shelf, but aimed at property, by an expert in the field. Both Dale and Chris know their stuff and won't charge $5500. Trusts can be collapsed in limited circumstances, but it's where they are a sham, designed solely to avoid tax or liability, while maintaining complete beneficial ownership of the asset. For instance a trust with a personal trustee who is the only beneficiary will collapse under challenge.

Go to an expert, get good advice, but no need to pay through the nose.

(Cheeky comment - the flash lawyer doesn't pay spotter's fees, does he?)

 

[Beach Bum]

lol quigles no he certainly don't!

Infact he's almost last on my list! (this is for another thread though )

I was just comparing prices for a "canned" trust deed.

P.S. imho, don't pay >$300 hr for advice before doing your homework.
read up before paying someone to answer basic questions, and if you subscribe to Batten's website, only do it once as it rarely gets updated.
There are many good books and resources.

 

[monoply]

So, any more replies?

Do I just pick a solicitor, or are there things people think I need written in my trust deed?

Any recommendations for Melb solictors, and advice on a fair price to pay for a good trust?

Cheers
mono

 

[austini]

Hi Monopoly,

When I was in Melbourne I consulted with a very high profile legal firm who are widely known for their knowledge of trusts. We were very dissapointed and for us it was money poorly spent. You may end up paying a small fortune for a one hour consult and a subsequent report padded with lots of very general stuff. Honestly unless your circumstances are very unique for the life of me I can't see why a very well drafted off-the-shelf Trust deed wouldn't meet your requirements.

After seeing the solicitor I then consulted with Dale and had him setup the trust for us. Now this was money very well spent. Dale is obviously not a lawyer but I can assure you that every concern or question I have had was very easily answered by Dale. And given that I am an avid researcher poor Dale gets hit with some hairy questions at times due to me constantly digging around. Gees if I had to pay a solicitor to answer every question that I have put to Dale I don't think I would have any money left to buy property

The deeds used by Dale GG and NickM (ie Chris Batten's deeds) have been put together by some of the best legal people around. And they are very flexible so as to meet most peoples requirements.

Honestly it will be a lot cheaper to talk to Dale first and then if you aren't satified consult with a solicitor.

Anyhow that's my humble thoughts on the matter based on experience to date.

Cheers - Gordon

 

[Ebbie]

The deeds used by Dale GG and NickM (ie Chris Batten's deeds) have been put together by some of the best legal people around. And they are very flexible so as to meet most peoples requirements.

Gordon, can you tell me what the difference is between Dale GG and NickM's hybrid trust deeds? Have you personally noticed any advantage of one over the other? I think I remember reading somewhere the deeds used by Dale GG allow the trust to redeem income units for less than the $1 originally paid for them (eg- 5c per income unit) but I don't know that for sure.

Cheers.

 

[austini]

Hi Ebbie,

That's a question for Dale ór Nick to answer themselves. Dale is our accountant and we use a HDT supplied by him. I was under the impression that Nick uses the same deeds. Sorry Nick if this is not the case.

I'm of the understanding that Chris Batten's deeds are supplied by Macquarie Group Services:

http://www.macquariegs.com.au/

As for redemption I don't know as we haven't got to the stage where we want to redeem units.

Hopefully Dale and/or Nick might answer your question for you later.

Cheers - Gordon

 

[NickM]

Hi Ebbie

We use the deeds as stated that have been drafted by Chris Batten.

The advantage i believe is that these deeds are specifically designed for the purchase of negative geared investments. I have seen other Hybrid Trust deeds that do not in my opinion serve this same purpose.

My main concern would be tax deductibility of the interest incurred to purchase the units. I believe that some deeds would fail in this area.

The trustee could redeem at a value lower than cost in order to try and defeat creditors. The deed states at Cl 24.6 that

"a Special Unit Holder is entitled to receive an amount of money upon any redemption of his special units"

No amount is stated and it would depend upon personal circumstances if units were redeemed for an amount below cost. I do not believe that this would necessarily succeed in a battle against creditors.

If you did this then NO i do not think you should manufacture it into a capital loss !

Hope this helps
NickM

 

[Beach Bum]

Hi Ebbie

The trustee could redeem at a value lower than cost in order to try and defeat creditors. The deed states at Cl 24.6 that

NickM

Can this be deemed an "undervalued trasaction" as per BANKRUPTCY ACT 1966 - SECT 120??

 

[DaleGG]

Hi

There is no difference between the deeds. We use the same supplier (MGS).
Nick's advice and service is excellent and I am flattered to be mentioned in the same company.

Dale

Gordon, can you tell me what the difference is between Dale GG and NickM's hybrid trust deeds? Have you personally noticed any advantage of one over the other? I think I remember reading somewhere the deeds used by Dale GG allow the trust to redeem income units for less than the $1 originally paid for them (eg- 5c per income unit) but I don't know that for sure.

Cheers.

 

[GreatPig]

Hi Nick,

The trustee could redeem at a value lower than cost in order to try and defeat creditors. The deed states at Cl 24.6 that

"a Special Unit Holder is entitled to receive an amount of money upon any redemption of his special units"

No amount is stated and it would depend upon personal circumstances if units were redeemed for an amount below cost.

I gather from the first part of that clause which says "by virtue of the rights attaching to the Special Units on their issue", the amount the units could be redeemed for would need to be stated at the time of issue. I presume that means the trustee couldn't just decide at the time of redemption.

And if the rights allowed the trustee at its absolute discretion to redeem the units for less than what was paid for them, I think you'd want to be absolutely sure you had control of the trust before you bought such units. Otherwise you could effectively be making a donation .

GP

 

[NickM]

Valid points GP and yes BB I do think that S 120 could cause you a problem.
I would strongly recommend legal advice before proceeding down the path of redeeming at less than cost if creditors are snapping at your heels.

I am the one flattered to be mentioned with Dale as his contributions to this forum are nothing short of extraordinary. The time he allocates here should be appreciated by all and his knowledge of trusts and tax law in general is spot on.

NIck M

 

[Ebbie]

There is a Canberra company who supplies trust deeds at www.symbolic.com.au. I've been told they are very cheap but as to the quality of their trust deeds I do not know (or whether they even supply HYBRID trusts).

They use Cleardocs (www.cleardocs.com) which is an online service and by far the cheapest, so I've been told. They also provide company registration if you are after a corp trustee.

I'm not one to go for an inferior product in the hope of saving a few bucks but if the deeds stack up at a competitive price it may be worth looking at.

Has anyone on the forum used them before and care to comment?

 

[NigelW]

I think the admonition from NickM and others about choosing your hybrid trust deed advisers carefully is a valid one.

Generally most advisers can get you a reasonable standard discretionary trust (altho I've seen a couple of shockers in a deal recently ).

BUT as an investor intending to negatively gear through a trust structure in my view you are best placed with a trust which looks about 90% like a standard discretionary (aka family) trust but has some clauses dealing with the ability to issue units.

I have heard even apparent experts referring to really complicated unit trusts which have a discretionary element to their unit entitlements...but it's just too messy and lacks flexibility which is crucial to any investment structure because you just never know what's going to happen.

I've said it before but I'll say it again...if you're thinking about setting up a trust structure, I think one of the best tax lawyers to set up a proper hybrid discretionary trust for investing in property and other -ve geared assets is Kevin Munro from Kevin Munro & Associates. See www.taxlegal.com.au for contact details...and no I don't work for him...but he has on occasions done work for me

Cheers
N.

 

[TryHard]

Agree 100%

I think it would be useful to ask about seeking and being granted a Private Binding Ruling from the ATO based on the Trust Deed you are offered, if you're seeking negative gearing benefits. (I know NickM covers something along these lines in his sessions)