Trusts: What do you want to know

Discussion in 'Legal Issues' started by Terry_w, 3rd Jan, 2014.

  1. prop_researcher

    prop_researcher Member

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    Also see where you can improve on the book "How to Legally Reduce Your Tax". Notice that these wily accountants used a customer benefit and the words "how to", so as to interest consumers rather than experts.

    If you want a self-publishing solution, please steer clear of vanity houses and retain complete control. (See my blog jenniferlancaster.com.au/blog for more).
     
  2. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

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    Thats actually well dealt with in many current publications. What affects it is the location. State law and duty impacts. then there is the SIS Act issue of Reg 13.22. And perhaps Schedule 2 which affects what a "fixed trust" is. And CGT law. And the issue of contribution strategies - Requiring AFSL guidance. And the issue of SMSF loans and the four common variations.....Some are heaps cheaper.

    So the simple explanation gets rather complicated. Its like buying off the rack sometimes it wont fit well. Tailored is a better fit.

    And the book becomes harder and harder to understand AND maintain and address every state isue. eg : which states still impose duty when the LBRF is repaid ?? Which states still have a potential absolute entitlement concern ?

    To simplly answer the question above step one is can the property be acquired without it being used as loan security ? If not it may not work. SIS Reg 13.22 requires that key issue for a SMSF to be involved. There is a strategy that can work if you wait three years after security is discharged too.

    Second units can NEVER be sold to the SMSF. That is prohibited by SISA s66. But a fresh issue of units at market value and a redemption might work...Thats the strategy rather that the written word in a book.

    There are many traps. Working with a knowledgable adviser avoids all problems. Cost $3,000 includes all setups and basic guidance.....Structures alone cost $1,500+. Within 24hours no reason a contract cant be signed. A good broker required too who can accelrate the loan process and match a good lender.
     
  3. LoneWolf

    LoneWolf Winter is coming....

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    Hey guys, if I am buying a block of land with the intention of development into unit/townhouse site, what are the benefits of buying the land under trust compared to buying it simply under my name.
     
  4. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

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    Just put them in her name and have all mailed to you. And a bank account etc you can operate. She doesnt have to know. Its a trust. Its how even Westpac etc deal with bank accounts. A nice wedding gift with no CGT issues. Trust settled when you put the $$ in. Trust property is cash / shares and a defined beneficiary. You act as the trustee. All the features of a trust - Tick. No vesting issues either. In simplest form no deed. VERY important you dont benefit from trust.

    A deed can be established (express trust) that vests at her age 25. Gives some asset protection is she has a financial / marital issue before age 25 but once she hits 25 it may be a problem. Maybe a discretionary trust which could distribute to you for tax purposes and it pays the tax shortfalll etc. You give her the DT control when she is 25. Just make her power of appointor subject to age 25. Its not her asset after age 25 until trust vests.
     
  5. perthguy

    perthguy Member

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    Thanks for taking the time to reply Paul. I take your point about working with a knowledgable adviser. It's more complicated than I thought! (as usual :rolleyes:)
     
  6. redwing

    redwing Progress Not Perfection

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    Hi Paul

    Re; The Kids

    Can you set up a Beneficiary Account?

    Do Funds like Vanguard, iShares etc do this?
     
  7. Cargs

    Cargs Member

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    Hi all,

    Firstly I apologise if my questions been answered already as I've not read through this whole thread.

    I'm yet to buy my first IP but am ready to get started. I also intend on starting my own business next year.

    I want to buy positive or at least neutral cashflow property (I have a 90k LOC equity loan ready to go) for the sake of asset protection I'm thinking it would be sensible to buy in a trust fund. What type of trust vehicle is most suitable and can I also use it to own my business assests (vehicles, tooling etc) as well as my PPOR?

    How do I get started? Do I see an accountant?
     
  8. Terry_w

    Terry_w Member

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    Only a discretionary trust offers asset protection (or a SMSF). But the strenght of the protection will depend on the set up.

    The same trust could own business assets, but if the trustee is sued as trustee then the business assets will be exposed. A business should not be run from the same trust because of the high level of risk with business.

    Only a lawyer can set up a trust but an acccountant can give you tax advice on the various aspects.

    Just because a property is positve geared doesnt mean it should go into a trust. In NSW this could take it from positve to negative due to land tax.
     
  9. Terry_w

    Terry_w Member

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    Benefits could included:
    1. General flexibility
    2. passing control
    3. asset protection
    4. reduced stamp duty on transfer
    5. reduced land tax in some states
    6. asset protection on bankruptcy
    7 asset protection on loss of capacity
    8 asset protection on death
    9 tax benefits - streaming income saving tax
    10. CGT benefits - in distirbution
    11. Borrowing flexibility
    12. Ability to move residential property indirecting into Smsf
    13. Ability to increase borrowings with the interest deductible but the funds used for personal expenses

    etc
     
  10. thydzik

    thydzik Member

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    definitely interested in your book.

    couple of questions I have, some already asked.

    trust structure for rental, trust structure for developments?

    how a company structure works with a trust?
     
  11. LoneWolf

    LoneWolf Winter is coming....

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    Thanks terry, I am currently applying for a trust as we speak.

    PS: when will your book be released? Need to grab a copy
     
  12. LoneWolf

    LoneWolf Winter is coming....

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    On another note.

    Once properties are owned under a trust, negative gearing is not applicable, is that right? Any way to get around this?
     
  13. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

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    Negative gearing may leave losses quarantined in some trusts. Personal advice is best strategy. Also:

    1. engineer borrowing so that neg gearing doesnt occur. This is the example for SMSF limited recourse. You dont want a borrowing to cause losses as the erodes the fund capital adn forces contributions to be increased. Instead strategy is slightly lower gearing.
    2. Unit trusts dont borrow. The unitholder borrows to buy units and claims the interest against + trust income
     
  14. jackbak

    jackbak Member

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    Trusts for Asset Protection

    So I had a meeting with my financial adviser last week as we are about to buy another IP, told him I may becoming the director of a mid-sized company within the next couple of years. Asked him about asset protection and whether we should buy the IP in my wife's name or in a trust. He told me not to worry, said as long as it is in a 'low risk' industry (it is) and I know what's happening in the business (I do) and have liability insurance (I will) that the chances of being sued are slim to none.

    Later that day I had a meeting with my accountant regarding a different matter (who is also a FA) and asked him the same question, and his answer was to set up a trust because it's better to be safe than sorry....

    Very confused, what do you think?
     
  15. LoneWolf

    LoneWolf Winter is coming....

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    I can't say I am an expert, so does this mean that if trust company owns properties, there is no point claiming depreciation, unless the property is positive geared and that you want to bring back to neutral?
     
  16. Terry_w

    Terry_w Member

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    Asset protection is legal advice and not able to be given by an accountant or financial advisor. A trust won't give much in terms of asset protection because the trustee is liable for the debts. A company can provide asset protection due to its limited liability nature - and this includes if it is acting as a trust. However ifthe trustee is not indemnified out of the trust assets then the directors can be personally liable.

    If you are sued for whatever reason then assets owned by a spouse, or a company or a trust can be at risk depending how it was all set up and constructed.

    I have written a separate book on asset protection as well as the trust one, but it needs tidying up a lot.

    Expect to release the trust one later in the year and asset protection next year.
     
  17. jackbak

    jackbak Member

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    Great, thanks Terry!
     
  18. coastymike

    coastymike Member

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  19. Redwood

    Redwood Member

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    Michael

    I am interested in the book. I'll have the staff read for education as well (i'm sure I will get heaps out of it too.

    My remaining question is:
    How many companies/ ABNs does Terry have now?:eek:

    Well done.

    Cheers, Ivan
     
  20. Terry_w

    Terry_w Member

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    More than I can poke at pen at. :)