Hi – I’ve been reading information on these forums about trust/company structures for IP’s. I’m very new to this game. What I pick up from them is a discretionary trust is the best way to go for me initially. But I have a few more questions:
1. How is there asset protection in a trust?
2. If yes, is there any reason to incorporate a company since it’s expense and complex?
3. I can apply for the first home owners grant so thinking about buying individually and then every other property under the trust. Any problems with this or would this be bad?
4. Some info says Trust are expensive, yet I see them for sale for approx $250 (I find this cheap). Are there any hidden expense I haven’t found yet?Thankyou,
LukeHi Lukebe2,
Thanks for your post and welcome to the forums.
1. How is there asset protection in a trust?It’s a little complicated to explain in one or two sentences, but such a structure allows you to control the asset (and the income from the asset) without actually having to own it in your own name.
As such, if you get sued as an individual, the asset cannot usually be taken as you don’t own it.
2. If yes, is there any reason to incorporate a company since it’s expense and complex?The idea behind having a corporate trustee is to minimise the liability of the trustee (i.e. it has no assets other than a small amount of cash on hand).
This is not necessarily an absolute must, but it does ‘bed down’ the idea of complete asset protection.
3. I can apply for the first home owners grant so thinking about buying individually and then every other property under the trust. Any problems with this or would this be bad?Hmmm – the FHOG only applies to property you intend living in as your home. In many cases the perceived benefit of FHOG is swallowed up but other aspects in the deal.
Ultimately, you need to crunch the numbers and weigh up lifestyle and personal decisions. As a general rule, I don’t let tax decisions run the investment, I run the investment for profit while also trying to pay the lowest tax legally possible.
4. Some info says Trust are expensive, yet I see them for sale for approx $250 (I find this cheap). Are there any hidden expense I haven’t found yet?You should expect to pay about $2,000 for a coy/tust set up, and then $1,000ish per annum to cover compliance and accounting fees. It’s not cheap, so be sure to weigh up the cost:benefit.
Have a very merry Christmas,
Bye,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Luke,
It recently cost me about $2600 to have a good accountant set up a hybrid discretionary trust with corporate trustee. You could find cheaper, but given the importance of having your structure right, I don’t think it pays to skimp. In the event of a law suit, the devil could be in the detail, so you want to have it right before you start.
A single director company just for the purposes of being a trustee is not very expensive to run.
There are two primary choices with trusts: a pure discretionary trust and a hybrid trust (cross between a discretionary and a unit trust). The latter can be useful for negatively geared portfolios and for allowing multiple independant parties to invest together.
GP
Thanks guys. Lucky for me my best mate is a CA.
Had to double check the reply name there Steve. I read your book until 4:30am, so off to work bleary eyed. Actually I think I might call in sick so I can finish it… hahaha great book.
You may think I’m mad for posting a question here when my best mate is an account. Well as you would know, sometimes they give text boox advice or there is something they have not experienced yet. So I’m using his skills but finding out what options lie below.
You can get a trust deed for about $135 at http://www.cleardocs.com.au
You will also have to pay stamp duty on the deed, which varies from state to state, in NSW it is $200.Trusts should cost virtually nothing to run. just a tax reutrn each year.
Terryw
Discover Home Loans
Mortgage Broker
Click below to email meTerryw | 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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