i have a question in regards to trusts, ill give you a brief rundown then ask the question.
I have a family trust and i have a company acting as the trustee. The company does not trade, its sole purpose of existence is to act as the trustee. I am the director of the company hence i make all the decisions.
The trust is set up so i can purchase property and place it into the trust, ie tax benefits, asset protection etc.
My question is can i also run a business through the trust aswell ? ie have the trust purchase another company and actually have this company trading, or should it be set up seperatly through another trust ie not with my property investments.
I have a similar scenario so I’ll give this a go but really you need an accountant to verify this. I think it depends more on the trust structure – is it a unit trust, in which case don’t do it, or is it a discretionary trust with several beneficiaries in which case it may be okay, because at the end of the day the bank trying to get money back would not be able to specify which beneficiary owned which asset. Having said that if you as sole director of the trustee company have given a directors guarantee to a property loan and to a business loan this may negate the multiple beneficiary benefits and leave you open to losing everything. I run my business (debt free, litigation fairy staying away from me) and purchase property, education material etc under this structure.
Sorry I can’t give you a straight answer, but I’ll be interested to see what an accountant or trust guru has to offer on this one.
One way would be for the Trust to be shareholder in the new company (the business). If anything goes wrong, the shareholders could not be held to be liable. Dividends would then flow on into the trust.
It is not good for the trust to run a business as if anything goes wrong all the assets of the trust could be at risk.
If your trust merely purchased a company which ran a business it would not be operating a business in my view.
It would merely be the shareholder, and the directors will be running the company. The directors’ would/may have to sign guarantees, and would be the ones that the creditors come after if they have done the wrong thing. If all went belly up – the trust would lose the income, the assets of the company (as the company will be losing them), and it’s value in shares – which is normally about $2.
This is a much better way than for the trust to own all company assets, and actually do the trading. This is where you would be up for the properties being available to creditors if things went wrong.
From what i’ve been reading of late, if it can be substantiated that the reason for the existence of the trust ( dont know how they determine this) is to hide or protect your assets from creditors it can be a waste of time as if this is proven, your assets can be “reached”..
Just from info i’ve read of late..
REDWING
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Good point. I have read that if you are planning on becoming bankrupt and transfer your assets knowing this, then the bankruptcy court can overturn these transactions as the purose was to defeat creditors. But I think if you are just purchasing assets on behalf of the trust, then they are generally out of reach.
Good point. I have read that if you are planning on becoming bankrupt and transfer your assets knowing this, then the bankruptcy court can overturn these transactions as the purose was to defeat creditors. But I think if you are just purchasing assets on behalf of the trust, then they are generally out of reach.