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PTN, why is it going to be hard? You can just have one trust. The trustee will just chose who to distribute to each you.
Only a individual or company (or combinations) can be trustees. Another trust cannot. But one trust can be a beneficiary of another.
Terryw
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Hi Jennifer
Sounds like an excellent plan.
The original owner will have a mortgage on the property, but you will be paying out this mortgage, so it should not be a problem. Just think of it like you have loans with Bank A and Bank B, if the price has increased you just refinance the lot with bank C and pay out bank A and bank B.
Terryw
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Advertising fees? or cleaning expenses?
Terryw
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Sounds like your in Vic. I beleive vendors are legally require to prepare a statement consisting of various things about the property – building approvals, plans, rates, various utility connections etc.
Terryw
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Originally posted by Mortgage Hunter:Originally posted by ptn:Thanks guys,
I don’t want to approach an accountant or a lawyer at it will cost me $$$ just to say hello.
Thanks TerryW, you’ve given me a bit more confident in buying the family trust.
Regards
ptnI bet you that a mistake will cost you more.
I think you are focussing on small amounts of money and losing sight of the big picture. If you proceed without getting an accountant to sign off on what you do then you are setting yourself up for a fall. Just from reading your posts I doubt very much that you are your own best advisor.
My Doctor friends have a saying. “Any Doctor who treats himself has a fool for a patient.” and at least they are qualified to give the treatment.
Lastly can you explain the benefits of using a standard family trust over using a hybrid discretionary trust? If you cannot then please seek professional advice [blush2]
True. I like to think I know what I am doing. The trust deeds from Lawcentral are excellent, but what if you don’t know who to put as appointor – or how many, or trustee. Or worse, getting the wrong trust. Changning things later can be expensive as Simon says.
Terryw
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Originally posted by ownahome:From a purely investment point of view a company is a seperate entity. This means it has its own borrowing power seperate to the directors and shareholders. When low doc loans.. LMI are invloved you can effectively double your borrowing capacity before you need to source private finance or higher rate non-LMi low doc loans.
Hi Ownahome
I agree that companies are separate legal entities. But cannot see how a campany can increase borrowing capacity. Virtually all lenders will require personal guarrantees from directors. This limits things. I am not 100% certain, but presume that on low docs the maximum exposure levels will include existing loans that the directors have as well as the companies. ie you do not each get a maximium exposure level.
Originally posted by ownahome:Your maximum tax rate is 30%. If you are doing sub-div, flips or reno with purchase to sale under 12 months you are paying only 30% as opposed to most likely 48.5% tax in individual name. So you use the company for short term projects and personal or trusts for longer term to enable the 50% CGT saving.
True, but if you were using a trust in this instance, you would have the additional flexibility of distributing income to other benefificaries on lower tax rates – who would get the 50% CGT reduction. As a last resort you could distribute to a company to cap the tax rate.
Terryw
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Originally posted by ptn:Hi Ownahome,
Your advice is very valuable. I am still pondering between a company (expensive setup and ongoing) or a family trust. I need to know the best way forward given the following scenario:
My family of 4 + my mother in law (5 trustee) . We buy an IP using this new family trust. If for some reason, we decided to remove my mother in law out of the family trust, do we pay stamp duty on the IP or are there some complex issue. Further more, if I add my father into the trust which already has an IP; what complication am I in for?Kind regards
ptnYou have to seriously consider many issues.
One is loans. If you have 5 trustees, then the loan will be in 5 names. This will affect borrowing capacity for subsequent borrowings. Maybe consider one or two trustees – leave off those without an income. The others can still benefit and contribute.
Terryw
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Originally posted by JohnSmith:The trust owns the property. What you do with beneficiaries or trustees does not affect who owns the property, and therefore there are no stamp duty issues.
Regards
JohnInspired Finance
(02) 9944 7776Thats not necessarily true. If you add or remove beneificiaries to a trust, this could cause a resettlement to occur. This is when the ATO deems a new trust to be formed and all the existing trust assets transfered (ie sold) from the old to the new. This means stamp duty and possibly CGT on everything the trust owns.
What John probably means is the trust deed is worded in such a way that you can just stop distributing to one person whithout having to actually remove them from the trust.
Terryw
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Hi Bob
Tax Consequences are mainly CGT related. You can only have one main residence per time. You can only claim a property as your main residence once you have lived in it. So in this situation you could claim either as your main residence. You will have up to 6 years in which you can continue to claim the first one as your main residence and not pay CGT if you sell. I guess what all this boils down to is, after up to 6 years you can decide to sell one and not pay CGT.
Better change this loan to interest only though to maximise deductions.
2. If you are only going to be borrowing $200,000, then the fact that HSBC will lend you more is irrelevant. Chose the lender that suits your situation best. 7.10% is a good rate though.
Terryw
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Do you intend buying more? If so a trust is probably worth considering now.
Terryw
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Same in NSW I beleive!
Terryw
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Hi Celest
What is the specific course you are doing? Sounds interesting.
I was bored as well, so enroled in a Law degree, am a 1/3 of the way to being a lawyer now. Have you considered law?
Terryw
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I know of one client of has purchased using a company. He now regrets it.
Companies are best for business as liability is limited.
Appreciating assets are best held in some sort of discretionary trust for both asset protection reasons and tax savings.
Terryw
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Hi Max,
Sorry for the late reply, I am in Thailand.
Thats a LVR of around 67% needed. It may be possible to do, but time is running out. I won’t be back till next week. Maybe you could try Paramount Mortgages http://www.paramountmortgages.com.auTerryw
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I beleive that if you can get a family court order, then the transfer can be done without stamp duty. But as you are not married, maybe this is not possible?
Terryw
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I agree with Michael, that you should get proper advice. But for what is it worth, I have two of those trusts from LAwcentral.
Terryw
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Here is a link to some tax exam questions and answers concerning the claiming of self education expenses:
http://www.taxinstitute.com.au/student/contax_7_exam.html
Terryw
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May depend on what sort of Bill you have to pay.
Terryw
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I agree with Dave, crunch some numbers. Consider also what you could do with the cash now if you sold, could you make more than the tax you would save by holding on for 8 more months?
Terryw
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John’s idea sounds good!
Terryw
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