trust question

A

Anonymous

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From: Anonymous


Hi everyone,

These are basic questions about trusts. I'm about to buy my second property (first being the family home). The hubbie and I are also going to invest in shares. I've been scanning this forum for a couple of months and am catching on to the idea of setting up a trust and buying my investments in the name of the trust. This is especially since we plan to acquire lots of IPs and shares to provide us with a passive income. Enough waffling, here's my questions...

1. Anyone know any good books about trusts so I can learn more about them? I've been reading financial books by Paul clitheroe and noel whittaker and they NEVER mention trusts as an effective wealth/wealth protection tool. Even Jan Somers (our esteemed forum host) says that trusts are probably more suited to the retired investor, not one still in the rat race.

2. Should we be buying shares in the name of our trust as well (once we set up the trust)?

Thanks in anticipation of your responses.

Amy
 
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Reply: 1
From: Dale Gatherum-Goss


Hi Amy

Good for you. As you know, I am an advocate of using trusts to hold long term wealth assets and think you are very much on the right track.

Yes, I would (and do) buy shares in the trust as well as properties.

As far as I know, there are not many books available . . .

Nick Renton wrote a book on trusts that is very well regarded by most. I believe this is about $30 and available from most good bookshops.


Cheers

Dale
 
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Reply: 2
From: Geoff Whitfield


Hi Amy,

For once, I'd like to take issue with Dale's usually excellent advice.

Renton's books is very good for all the detail on setting up trust.

But for an overview on why you would set up a trust in the first place, I would recommend Dale's "Tax Battles" manual (available from Freestylers for $99) as a great starting point.

(As a free bonus, there's all sorts of good stuff about tax deductions and real estate investing).

I wish someone had told me some of this years ago.

When you know why, Renton's book will be much more useful for you.
 
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W

WebBoard

Guest
Reply: 2.1
From: Terry W


There is a free booklet available from Chris Batten (www.chrisbatten.com.au). He also has a $99 book available, although I haven't seen it. (does anyone have it?)

Terryw
 
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Reply: 2.2
From: Paul Zagoridis


I also strongly recommend Dale's Tax Battles manual.

Clitheroe and Whittaker never discuss trusts because they are Financial Planners' camp. The cynic in me observes that planners cannot make a trailing commission setting up structures.

Also planners believe structuring immediately removes the value of generic advice. In reality, general advice is valid for trusts if the advice takes the existence of a trust into account.

Jan Sommers' wealth was built on negative gearing. Trusts present some obstacles to traditional negative gearing models.

The audience for all three skews towards new investors (aka newbies). Trusts are poorly implemented by Financial Planners and Accountants so adding the complexity would reduce the number of students actually following the education.

Also ASIC and Government are protecting the public from its own stupidity. Hence the reforms (increasing regulation) to the Financial Services industry and the Government's removal of Stamp Duty on listed securities but retention on Real Estate transactions. They basically want retail investors to use pre-packaged retail products.

PaulZag
Dreamspinner
WealthEsteem :: Psychology of the Deal
http://www.wealthesteem.org/
 
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W

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Guest
Reply: 2.2.1
From: Gordon Austin


For some excellent "free" publications on trusts try these web sites:

http://www.taxlegal.com.au/publications_latest.epl

and

http://www.taxlawyers.com.au/Publications/What's%20New/default.htm

Munro's "Trusts and Tax Planning" publication also does and excellent job in explaining the Hybrid Trust structure which allows you to still have negative gearing benefits. However there is some compromisation of asset protection with Hybrid trusts and it is probably somewhat more complex to administer.

Would however suggest that you definately consult with a professional like Dale GG before making the final decision.

Gordon
 
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A

Anonymous

Guest
Reply: 2.2.1.1
From: Anonymous


Hi everyone,

Thank you all very much for your valuable advice. I'm going to buy Dale's tax manual now, and maybe all of the other books recommended. It must be obvious there are a lot about trusts I don't know yet, but I'm particularly curious as to why trusts don't really work for a negatively geared property??? Or is this something that will become clear to me once I start reading a bit more about trusts?

Thanks again everyone

Amy
 
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Reply: 2.2.1.1.1
From: Mark Laszczuk


Anon,
Negative gearing doesn't work with trusts because the trust cannot claim losses against the assets it holds. However, there are some people who have managed to set up a hybrid trust situation (I believe it is a mix of a unit trust and discretionary trust, a 'hybrid' of the two, if you will). The negative geared benefits are available with these, but as has already been siad, there are asset protection issues involved. Also, I believe Dale said something once upon a time about hybrids being less flexible than discretionary trusts. However, since you posted anonymously, don't count on Dale answering your post.

Mark
'no hat, some cattle'

P.S. None of the above is advice, just stuff I have heard. For proper advice, go see someone qualified to give it, which I am not.
 
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Sim

Administrator
Reply: 2.2.1.1.1.1
From: Sim' Hampel


On 8/6/02 5:44:00 PM, Mark Laszczuk wrote:
>
>Negative gearing doesn't work
>with trusts because the trust
>cannot claim losses against
>the assets it holds.

To be exact, the loss from negatively geared investments held personally can be offset against other income, including PAYE income you earn from work... which effectively reduces the tax you pay on your salary.

Trusts with negatively geared investments can only offset that loss against income from other investments held in that trust. If there is no net income, or the losses are more than the income, then there is nothing to offset the net loss - and no tax benefit to be had.

However, these losses can be carried forward to be offset against income in future years. You still get the benefit, but you may have to wait for it.

 
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Reply: 2.2.1.1.1.1.1
From: Mark Laszczuk


Yeah, what Sim siad. Told you I don't give advice.

Mark
'no hat, some cattle'
 
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