Hi, first time here. My business partner and I are about to buy in NZ (were based in the ACT), and are setting up discrestionary trusts. My question is, as I am a single and will be the only beneficiary, is it alright for me to be the trustee as well. I was told by my solicitor that I might want to choose a friend or relative to act in this capacity, but I am worried that making them trustee, will limit their ability to borrow monies, effect their aged pension etc.
Any suggestions greatly appreciated.
All the best
Michael,
CanberraPersonally I prefer to use a corporate Trusteee & be the director of the company.
It adds that extra layer of removal to the situation – and has some other advantages.
Cheers,
Aceyducey
Solicitors sometimes don’t understand how banks work. Bank’s will want a personal guarrantee from the trustee or the directors of the trustee company. So putting a friend or relative in as trustee probably wouldn’t be a good idea unless they are willing to give the guarrantees and sign various documents.
And then as you mentioned, this may effect their centrelink entitlements etc.
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
Thanks Terry,
This was what I was concerned about. I guess I am looking to get the best of both worlds. i.e. Some sort of protection from the trust, and at the same time not disadvantaging the trustee. Following the model in Wealth Guardian, I was considering setting up a $2 company and apoint the director (me) as trustee later down the track once we have purchased a few properties, and the CF allows for the extra expenses of having a company.
As I understand it, having both the trust and $2 company will entail two lots of expenses, making (in the beginning) the who project CF negative.
Michael
Redka,
Don’t take my word for it, but i was just talking about this to my NZ broker the other day, and he said alot of people are trying to have a company own the trust, and the banks are not keen on the idea. He makes the point that banks are usually very conservative, and often balk at anything new or different.
Like I said, double check it, I hope I am wrong, would make it easier for you.
Dan.
Looking for positively geared property? Check out http://www.positivelygeared.com.au
Dantheman,
technically, the company doesn’t own the trust – it is only the trustee who holds the trust assets and conducts the business of the trust. The trustee (company or individual) can usually be changed if the Appointor desires. There is nothing new or different about trustee companies – they have been used for centuries.
Michael, you cannot be both the trustee and the sole beneficiary – you can’t hold something in trust for yourself! For example other beneficiaries may be family members (parents, siblings), or your favourite charity.
Do a search in this site – there should be more info.
TerryTerence McMahon
HomeWin
FinanceHI Terry,
Gets complicated doesn’t it? OK so as a sole beneficiary, I’m single and have not kids/other halves etc, is a trust worthwhile at this stage? I plan to buy numerous properties this year.
Do you know anything about the implications on the trustee in regards to their financial implications in the future.
i.e. If I was to appoint my father as trustee, he is on a pension, I was thinking this might effect this in some way (assest assement and all that).
Secondly if I appointed my mother (they are not together now), would it effect her later when she herself goes to buy properties?If you don’t know, no probs, I’ll keep looking on the forum. Excellent site.
Many thanks
Michael
CanberraMichael Maddy
[email protected]
Canberra, AusMichael,
my understanding is that you can be the trustee, but there must be other beneficiaries than you e.g. your parents. Who are the beneficiaries of your will? They could be the beneficiaries of the trust.
I think that if either of your parents were trustees, there may be no effect on pensions etc, since the assets are only held by the trustee for the trust, not for themselves. As you said, it becomes technical, and there could be implications. I don’t know for sure! Note that they may not want to be involved in the paperwork…
If you plan to buy numerous properties, or other assets such as shares, then consider a trust. Get professional advice first!Terence McMahon
HomeWin
Finance
My favourite tax quote: ATO s165-55With putting a charity as a beneficary, courts tend to see it as being as a proper trust (rather than as a asset protection device, etc), and they do not like to pull them apart if there is an outside beneficary as well. Also it’s good to give back to the community.
(please note, I’m noting saying you should have an outside beneficary, but it can help your cause).
Rgds.
Lucifer_auTerence
Centrelink has ‘cracked down’ on trusts in recent years. If you control a trust they deem you to be ‘owning’ the assets and income of the trust. They define controlling as being a trustee or appointor, (and even maybe a beneficiary in some instances – altho you would not know if you are a beneficiary of some trusts).
Michael. If you had your dad as trustee it would affect his pension and if you have your mum it would affect her pension later on and it would affect her borrowing capacity now as she would be responsible for the loan of the trust.
It is still worthwhile looking at using a trust. Even if you are on your own, you will not be sole beneficiary. Deeds are worded so that any relative now or in the future (whether living or yet to be born) will automatically be a beneficiary.
You may have all this positive cashflow comming in and may have to distribute it to yourself at the moment, but if you get married in, say, 5 years time, your new spouse and all her family would then become beneficiaries – reducing your tax bill!!
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
Thanks to all,
Starting to get the info into some sort of perspective now. Terryw, many thanks for your specific info, that’s was exactly what I was after.
What I did come across in searching for a solution to my trustee challenge, was the possiblity of having a solicitors firm act as an independent trustee. They have established a “Trustee Company”. I’m also thinking this would provide more legal strength in the courts if something happened down the track. The website I saw this on was http://www.fmlaw.co.nz in Trusts.
Is there anyone who might be able be able to add some light to this, especially if they are doing this now.
Cheers
MichaelMichael Maddy
[email protected]
Canberra, AusHi Michael
Why don’t you list your parents as beneficiaries (subject to any Centrelink tests as mentioned above, you don’t want to mess with pensions).
This way, there are more than just you as beneficiary (and you DON’T actually have to distribute any funds to them, that’s why it’s discretionary), and so there should be no problems you being the sole trustee.
Cheers
Mel
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