Help needed with current situation…..

Hi john, I have to admit I’m a bit reluctant to say yay or nay, because I don’t know your circumstances. For example, what’s your risk profile? Does your work expose you to personal liability? Are you involved in business? Are you a civil servant?

Also, what do you stand to lose? How much would you actually have left over if you sold all the properties and paid off your bank loans?

There’re just so many factors.

Cheers
Elysium-M

DIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…

johngee,

If you want want to protect your asset, I guess you have to bite the bullet and use trust to hold your asset. Maybe someone can help you with other ideas on this forum.[]

Breakfree

Judi (& earlier postee)

On the topic of Trusts (of varying kinds, how they work, when are they appropriate or not appropriate to use etc etc etc – Yes there are lotsa books and resources you could invest in. But boy o boy, the cost to buy the book/s may be small but then the time it will take you to get a handle on all of the above could be years!!!

Most of us who know and work with the various legal structures (he suggests with suitable humility) have studied them for years and know them almost backward and forwards and can help people apply the proper factors to their situation with far less pain – albeit at a cost to consult us…. You have to decide whether you can take the time to undertake the study in order to make an informed decision, or to invest the dollars getting good advice from your profefssional.

There’s bound to be books out there that will tell me how to remove my own appendix – even telling me where to buy cheap scalpels.. BUT this little brown duck wouldn’t attempt it in a pink fit!!

Similarly I believe passionately that anyone who wants to become involved in multiple asset purchases must take professional advice sooner rather than later.

Buying 3 properties and then deciding that they should have been purchased via a trust (or some other structure) can be financially very damaging later on… just think of paying the stamp duty and the lelgals all over again but now it’s on the increased value – wouldn’t that potentially knock the stuffing out of your hard won capital gains.

And let’s not forget that you would also be paying a share of the capital gain to the taxman at the time you transferred them to the Trust (‘cos you have sold them and made a gain)!!!

Take a breath and consider your investment future thoroughly BEFORE ploughing headlong into a investment strategy… P-L-E-A-S-E …. for your own (financial and mental) sanity. []

Gee, why wouldn’t you want a tax deductible trip to Sydney? Say a consulation Friday afternoon then you’d have to stay and shop… ummm I mean research the local market for the weekend since you’re here anyway rofl

Hi John,

Sorry I haven’t been around for a while – work’s been absolutely crazy. Haven’t had much time to breathe.

Anyway, Noel Whitaker had a great little article in the money section of last week’s Sunday Times (WA) on asset protection strategies. Check it out.

I still feel hesitant about telling you what to do. But if I was in your shoes, I’d personally probably not transfer the properties across. Rather, I’d set up a discretionary trust. I’d use the trust to borrow money, which will be lent to me to refinance the existing loans on the property.

The bank would want me to mortgage the properties as collateral for the loans. I would then get the bank’s permission to take out a second mortgage on the properties, in favour of the trust, to secure the money lent by the trust to me. This would mean that the properties are mortgaged all the way to the hilt. If I ever got sued successfully, and went down the financial gurgler, my houses would be relatively safe. Sure, even if the bank forced the sale of the properties, the surplus money would have to be paid to the trust, since it’s a secured debt owing by me to the trust.

You’d have to make sure that you have the sole power under the trust deed to choose the trustee, so that if you (or a corporate trustee) for some reason was unable to or disqualified from acting as trustee, you can choose a friendly person to step in as trustee.

Anyway, it’s only an idea. You’d still need to hire good lawyers and accountants (taxation, trust and involvency specialists) to make sure it’s a watertight arrangement. how much trouble and expense you want to go to obviously depends on how much is at stake.

Cheers
Elysium-M

DIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…

Hey Redwing

A Trust would be set up for long term needs, rather than short term income splitting.

If you are a 30% PAYE earner, then a Trust probably wouldn’t make any difference in the tax minimisation way. However, I’ve set up my trust for 3 reasons.

1. So that when I ‘depart this earth’, my beneficiaries don’t have to worry about CGT, and changing name on title, and waiting for probate etc. as the trust stays as is, and I have chosen the beneficiaries anyway.

2. Asset protection. So that I will not lose the lot if ever I have the misfortune of being sued.

3. Income splitting/tax minimisation. More for the income splitting side though – so that I can ‘farm’ income out to my folks who no longer work, to my sister while she’s on LWOP with her baby, to me so I don’t have to work etc.

If all beneficiaries of my trust are in the higher income brackets in any particular year, I am able to pay the money to a company that is also a beneficiary. This limits the tax to 30%, and I can distribute it from the company in future years when there is not such a high tax situation again.

Plus, if you read Dale GGs Trust Magic, he lists some awesome ways that your trust can buy you stuff pre tax that otherwise you would pay after tax dollars for, and you would be definitely still buying some of theset things.

Cheers
Mel

Mel

What Trust structure did you decide upon.. discretionary or hybrid ? Family ( as Steve has done ) ?

I realise if i went down this path the properties currently held would not be worth putting into the Trust, but so be it, they can be sold a few more years down the road if need be to purchase others which can then be held in the Trust..

‘very’ interested in the other benefits of Trust’s you and S.I.S mentioned in an old post ! []

Now, an accountant i spoke to sdaid you can have discretionary or Hybrid trust but not a Hybrid discretionary trust as i’ve seen mentioned here..True ?

REDWING

“Money is a currency, like electricity and it requires momentum to make it Effective”

Redwing, for a trust being set up with friends rather than family, I would definitely go the Unit Trust structure. This way there is a fixed entitlement for all, whereas with the Discretionary or Hybrid Discretionary (which can be done!) the trustee has discretion.

The Units in my Unit trust with the other people will be owned by my family trust, so I can still split the portion that is mine between family members as best fits.

Cheers
Mel