I know that trusts are beneficial when purchasing property because you can protect your assets and distribute profits easily but how do you get started with one after you have set it up with a company as trustee.
The trust has no money, so how do you get loans? What will the banks ask for?
troyid, you can either gift the money to the trust, or ‘loan’ it from yourself.
The bank will look for you to have a deposit, or additional security outside of the trust that you will let them grab.
The bank will also ask the trustee to sign as guarantor for the loan.
Cheers
MelIt is really no different to getting a loan in your own name. Lenders will ask for a guarrantee from the trustee (or Directors of the trustee company).
The only additional information that the banks usually ask for is a copy of the trust deed.
Terryw
Discover Home Loans
North Sydney
[email protected]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
What about if I have a trading company that wanted to give money to the trust to invest with. Can I just give it to the trust or do I have to loan it?
By the way what is the advantage of having a trust the 100% shareholder of the trading company rather than myself.
Troy, the company could gift the money to the trust. I guess it just depends how you will then account for the money in the company’s statements.
2. Asset protection. (I think)
Cheers
MelYes I would say it is safer to gift money to the trust. If you (or a company) loan the money and are ever sued, the person suing you could call in that loan. If a gift, then they probably couldn’t (depending on when it was gifted-if within 6 months of going bankrupt then you could be in trouble).
If the trust owns the shares in a trading company, then all the profits would go to the trust which could then distribute it at the trsutees discretion. If owned by individuals you don’t have this flexibility.
Terryw
Discover Home Loans
North Sydney
[email protected]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
As an example, say I have $200,000 profit in the trading company.
Could I gift this to the trust and then divide as follows
$50000 to myself
$100000 to 2 other people
$50000 property investmentHow would my trust be taxed on the gift based on this scenario?
Troy
if you trust is the shareholder, then the $200,000 could go to the trust as a dividend payment. The trust pays no tax if the money is distributed, so if $50,000 went to yourself, then you would pay tax on this money. it would be added to your other income, so you may end up paying more tax than if you left it in the company.
The $50,000 used for property investment, this would have to be distributed to someone or some entity and they would have to pay tax on this. The money can be loaned to another company or trust, but tax would still be paid on the initial distribution.this is my understanding anyway.
Terryw
Discover Home Loans
North Sydney
[email protected]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
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