Who DOESN'T use trusts?

[alexlee]

With all the discussions on the various trusts, I was wondering, does anyone have a sizeable portfolio (multiple IPs) but does NOT use trusts? Can you elaborate on why you do not, and what advantages / disadvantages there are in your experience of owning everything in your own name?
Alex

 

[DavidMc]

Rixter might be able to contribute here?

 

[The Y-man]

.... and willing to admit to it....

Issues revolve (or used to revolve?) around set up costs, maintenance costs (of trust), financing (ie getting loans), personal tax deductibility, CGT, and asset protection (or lack thereof)....

Cheers.

The Y-man

 

[Rixter]

Rixter might be able to contribute here?

Looks like I've been dobbed in

I have a $Mega IP portfolio and do not use Trusts. All IPs are in own name. I do so for ease & keeping it simple principle (KISS). I use Buildings & Public Liability Insurances for asset protection, which by the way is still required if you choose to use a Trust Structure.

All IP expenses are tax deductable. As CGA is a never never sell strategy thats LOE I basically do not have after tax income (as such) to distribute. All rental income is basically written off via IP expenses.

Hope this answers your question.

 

[Brenda Irwin]

I also do not have trusts. Mine are all jointly owned with my husband. He is the only one of us with wages. If one of us becomes deceased, assets will not be frozen, as full ownership is simply transfered to the surviving spouse.

All assets are insured and cover public liability. All are crosscollateralised including the ones carrying no debt. All mortgages including PPOR are held by the lender. Even if there is little debt, a maximum credit line is held for future purchases. More importantly, if someone wants to sue you, their lawyer will search into your financial status with the mindset that you can fund their fee. They will find you are fully drawn and all mortgages are held by the lender. It would be a brave lawyer to wish to take on a large lender.

With hubby on wages, he's does also get to pay a lions share of tax, and deduct only 1/2 of all expenses. The situation improves when we sell to reduce debt. If we have held the asset for over a year, then we are entitled to the 50% CGT exemption. Since we jointly owned the asset, only 25% of the CG is added to each of our incomes to be taxed. As I have a lovely tax free threshold, and low income there is very little tax for me.

 

[Petal]

I am pretty much the same as Rixter and Brenda, have 6 IP's all are insured and I am happy with the SANF.

Cheers
Petal

 

[Brenda Irwin]

There is a better threshold in Qld for land tax for joint and individuals than for trusts, trustees and companies too.

 

[wylie]

Our IPs also held in husband's name, no trusts. Negatively geared. When we bought the IPs we didn't know about trusts and to move them into a trust now would cost plenty. If we sold one, we would maybe look at it then, but probably not.

Wylie.

 

[RichardC]

I probably should have a discressionary trust for reasons other than those
normally quoted here.

Everything is simply in joint names. The biz is Mr & Mrs Thommo trading as...... and it's bank account is just in the Mr & Mrs format too. Only one account for the banks to gouge fees out of. LOL

 

[alexlee]

I was just thinking about trusts, and since I have no legal liability from my job (I'm an accountant but I don't practice: I work for banks and I'm just a mid- to low-level guy), and I fully insure my properties for public liability, etc, I was wondering whether I need trusts. While it provides asset protection you also hear stories about people fighting over control of trusts, etc. If it's all in my name, control is clear and I can do whatever I want.

Even if I go for more high-risk projects like development, I assume I can buy insurance to cover public liability. Is it possible to use companies and trusts to quarantine the risks of such a project? One of my units on the Gold Coast is currently being repaired (hopefully) by the Building Services AUthority because the developing company has gone bust. Most likely the builder just closed the company and 'moved' shop.
Alex

 

[kissfan]

Also dont have I/P's in trust. They are in my name, wifes' name or both names.

Similar to Wylie, when I first started investing, I wasn't really aware of trusts.

For me, trusts may complicate matters. I like to keep things at a level that I fully understand and as I don't fully understand trusts, I have opted to keep things in name structure only.

Aside from POSSIBLE benefits re asset protection, a couple of accountants have looked at my set-up and said that a trust structure may not be a huge advantage anyway.

Currently have 7 I/P's and a fair whack in managed funds and all is basicaly running smoothly (read, I know where everything is at). If things get more technical down the line, some sort of trust structure may be considered.

Regards
Marty

 

[The Y-man]

If your portfolio (of properties or shares or whatever) are pumping out cash, the trust allows flexibility in apportioning the income to take advantage of different personal tax brackets.

Cheers,

The Y-man

 

[RichardC]

If your portfolio (of properties or shares or whatever) are pumping out cash, the trust allows flexibility in apportioning the income to take advantage of different personal tax brackets.

Cheers,

The Y-man

It would appear, from the responses, few portfolios are "pumping out cash".

 

[The Wild One]

We haven't got involed with trusts either. Six ip's and ready for more. I'm the same as Rixter, and I think we even do our books and our use our LOC's the same way. I like to keep it simple with lots of good insurance.

I also only bye what I call tenant friendly properties, no rock walls, swimming pools, dangerous balconies, that sort of thing, and I keep my properties well maintained, which should be done regardless.

 

[geoffw]

If your portfolio (of properties or shares or whatever) are pumping out cash, the trust allows flexibility in apportioning the income to take advantage of different personal tax brackets.

That is a very important point.

Even if they aren't pumping out cash now, they will at some point in the future.

The same if you do sell and wish to mimimise CGT.

Though if you are single, and cannot distribute income, this has no benefit.

 

[our obsession]

No Trust...good faith

All properties in partner's name, (tax)...looked and read and asked and asked about Trust but decided to keep it reasonably simple for the moment.

Bought (and will keep buying) to hold them for many many many years.

Everything ticking away nicely...

 

[MJK]

I'm another no truster. 5 properties + managed funds and no trusts. There are plenty of opportunities in real estate investing to lower your tax without worring about balancing the income. Tax problem equals buy more property or more equities on margin. I agree with the keep it simple philosophy.

MJK

 

[goddessk]

I have three IP's and all are in my own name. I did consider a trust but could not see the benefit of the costs to set up. I do not plan to have children and although I could one day distribute income to my partner (if we got married or became defacto, and my properties became +ve) I just can't go there. I trust him, however have had issues with partners in the past and just like to keep things in my own name, and simple.

 

[Brenda Irwin]

I thought trusts were no protection in divorce/defacto breakups as the family court has the power to unravel and distribute the assets within a trust. Perhaps forum has someone who can clarify?

I also heard pre-nups in Australia don't carry any legal protection as they do in the US. Anyone else heard this?

 

[Rixter]

I thought trusts were no protection in divorce/defacto breakups as the family court has the power to unravel and distribute the assets within a trust. Perhaps forum has someone who can clarify?

I have also been advised the same from a professional in this area.