Hi, long time reader, first time poster.
I am investigating setting up a family trust with a company for a trustee for my PPOR. I have a few questions which relate to my situation which I'm hoping to get some more information on so see if im heading in the right track.
background:
I currently owe 50k on a place worth ~450,000, When I last did the loan i took it over 5 years with 100k owing, and now im down to the last 2 years (so ~2.2k p/m repayments). The property is in my name only.I want to be able to transfer the property to my daughter in the far future at some time (like 10-15 years from now) when she is 21 but I don't wish to pay the stamp duty costs of tomorrow (prefer to pay it in today's money).
questions:
1. If I setup a DT with a company that I control, is it possible to just sign over the company at a later stage with no stamp duty incurred?2. The other thing I need to do (ideally at the same time) is to refinance the existing 50k + any stamp duty to transfer the property into this DH + company trustee structure and probably put it over 15 years (ie it will be paid off in full by the time my daughter is 21).
3. What banks will loan/refinance this sort of cash over that time-frame in this type of structure? I am lead to believe that the 'big 4' banks wont touch a trust
4. Is there anyone familiar with this type of setup in the ACT or NSW who can help (and is knowledgeable) with all steps of the process, ie setup company, trust and broker a loan with a bank.
5. what would be the cost to initially set this up? ideally I would incorporate this initial cost into the refinancing of the loan
The prime reason for this is asset protection at this stage, there is the possibility I will rent out the property and buy another into the same or similar structure, however tax reasons aside, i am wondering what the implications are if say a future partner of mine wanted to live with me, split with me in the next 10-15 years and then wanted to take a share of the property which is not hers to take (ie its intended for my daughter in the future).
I guess I would like to know if im on the right track or if i need to consider a totally different option
thankyou for your time
Don't forget the company is only the trustee. You can easily pass control of the trustee on by transferring shares in it. Ownership is in 2 forms – legal and beneficial. The trustee is the legal owner. Changing shareholders won't affect the legal ownership. You should also be able to change the legal owner without stamp duty, or just nominal stamp duty, $50 in NSW as long as the beneficial ownership is not changing. The beneficial owners are all those listed in the trust deed. Changing beneficial ownership can result in stamp duty and CGT being applied. So you need to make sure that she is a beneficiary.
What you are doing is not a refinancing but a transfer. Ownership is changing. So you will need to do transfer documents, pay stamp duty and apply for the loan again. it is as if you are selling to the trust.
All banks lend to trusts. You shouldn't have much of a problem there.
You should get legal and tax advice and get a broker who can do the loan side of things. Setting up a company and trust with some advice will cost about $2k.
Trust assets are separate assets to your personal assets so if you are personally sued they are generally out of reach. However, the family law court has extensive powers to make orders over trust property and company property that you control or have an interest in. it can still help though as it adds another layer.
There are also land tax issues and tax issues you need to consider before jumping into this.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry is right.
Most lenders wont have a trouble in lending to a Discretionary Trust however in saying that not all lenders will offer you the same competitive loan terms and interest discounts where their is a Corporate Trustee.
I can think of a few with the features you are after.
Richard Taylor | Australia's leading private lender
Ah thanks for this information, This helps me gather the right questions to ask when I do find a financial adviser. I'd prefer to go in knowing the questions I want answers too rather than be sold managed funds from an adviser who gets a commission from them which seems to be my experience in the ACT and then paying for their time.
When ringing up potential financial advisers, should I be asking first if they know how a company DT structure works for property, or is this 'Financial Advisers 101'?
Terryw, when you mention the 'far reaching powers' of the family law courts, does this extend to relatives? ie, i pass 100% control of the company to a sister or a brother? Obviously I would trust that they give the company control to my daughter when she turns 21 or back to me if she was not old enough after the dust settles of any potential family court disputes.
Richard,
What is the sort of difference in loan terms and interest between a company loan and an individual loan? Would it be a huge amount on a 75-100k loan over 15 years (50k +stamp duty + fees etc)?One last question, how is the stamp duty calculated? on the sale price of the house to the trust or by some other means? Having bought the house 10 years ago, I can't remember what documents I would have signed that would have had this figure.
You shouldn't be discussing this with a financial planner/advisor, but a lawyer. It is a legal matter. You may also need some tax advice and lawyers can cover this too.
Family law courts have the power to make orders for property in companies or trusts even if the person in the family law matter is not the legal owner. I have heard of a case where a man had his parents as directors of the trustee company and the court got at the trust assets. You need careful planning here.
Stamp duty is calculated on the value of the property at the date of transfer.
Loan rates won't differ too much. Some lenders will be the same whether trust or personal, others may not allow you to take the package under a trust, so maybe 0.7% more.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry beat me to it but even at 0.7% over 15 years on 100K that is 10% savings over the term of the loan.
Certainly would rather have it in my pocket than the lenders.
Richard Taylor | Australia's leading private lender
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