Company or Trust or Trust Company?

If you use a discretionary trust the benificaries can be any other entity, including a company or other trust. Also if you distribute funds to a minor(under 18) you will be taxed at 66% from dollar 1(no tax free threshold).
There ary many personal circumstances that should be considered and I recommend talking to an expert before doing anything.

Colin Wardle
CATA Asset Protection
[email protected]

Hello All,
This is my first mail as I just joined the site.
I guess I am in the same situation than Nahna, preparing the fundamentals to start making real money.
From the e-mails plus other sources I guess the follwoing:
1-Set up a Family Trust
2-Do not specified the beneficiaries on it.
3-Set up a Trustee Company P/L that will administered the assest of the Family Trust.
4-I guess the shareholders and directors in this Trustee could be me and my partner.
5-Buy the properties using the Trustee Company P/L
6-Loan with the bank can be done under my name so I can deduct the intererest (I amnot sure about this)
7-Income goes into the Trustee and is distributed between the beneficiaries to minimise Tax payments.

Can anyone help me to see if this broad strategy is achievable?

Also, I understant that the strategy will be different for each individual as everyone of us have different circumstances however, It would be nice if we can receive some examples to clarify the issue.

Best regards,

Eleven

Eleven
Why a family trust? There are many advantages ofa discretionary trust that are more flexible than a family trust.
You must specify at lease onn benificary for the trust, but with a good trust deed you can change this at any time quite easily.
If you use the trustee company to buy the property you may as well buy it in your name. You should buy it in the trust.
If you want to talk to me about possible structures just e-mail me at [email protected]

GreatPig
The $772 is for earned income eg.worked for. Income from an unearned sorce eg. distributions from a trust will be taxed at 66% on tax free.

You do not need a hybrid trust to claim the intrest, there are some exelent stratagies for this using less complex structures

I stand corrected
Sorry

GreatPig
A “family trust” can only distribute funds to family but a discretionary trust can distribute funds to any benificary eg. family, friends, or another entity like a company, trust or super fund. That would be the major difference but it depends on the trust deed and how flexible it is. I like them to be as flexible as you can get, just in cast I need to change anything I can do it quickly.

As for your second question, you can protect assets that are outside the trust structure and in your own name, so you get the full effect of having the IP in your name. Another benifit is that you can protect existing assets without selling them into the trust.

Colin Wardle
Asset Protection Specialist
CATA Asset Protection

This is the area to confuses me, where you can put an asset in a trust name but still get negative gearing benefits. I just got off the phone with my accountant, she said I can’t put say an IP under a trust and still get a negative gearing benefits. If you lend a money to the trust, the trust need to pay you back the interest to you. That means you are not loosing money on your borrowing since interest payment from the loan = interest that the trust pay to you. And the trust can claim that as an investment cost but it has no other income except rental to offest it to.

I would like to reply to CATA:
Quoted: “A “family trust” can only distribute funds to family but a discretionary trust can distribute funds to any benificary eg. family, friends, or another entity like a company, trust or super fund. That would be the major difference but it depends on the trust deed and how flexible it is. I like them to be as flexible as you can get, just in cast I need to change anything I can do it quickly.”

The above statement is absolutely incorrect:

Basic Trust Details
Name of Trust
You are free to choose a suitable name for your Discretionary Trust ie XXX Family Trust, ABC Trust etc. The name should be appropriate in terms of reflecting the nature of the Discretionary Trust’s business (if any), its purpose or the identity of the trustee. You should avoid choosing names that suggest an inappropriate connection with or endorsement by persons, organisations or governments with which you are not involved.

1.3 Trustee: company or individual? … a beneficiary?
1.3.1 You should give considerable thought to the identity of the trustee of the Discretionary Trust. Generally, a trustee will be an individual or company. In most instances, it is preferable for a company to be trustee of a Trust so that when it conducts business, enters into transactions, incurs debts, etc on behalf of the Trust, it will often have the benefit of limited liability.

1.3.3 The trustee may be a beneficiary of the trust. However, if the trustee is a beneficiary, then it is important that there be at least one other named beneficiary as well. then,you should name 2 beneficiaries. (It is then up to the trustee to determine which beneficiaries actually benefit from the trust.)

2. How many and identity of named Beneficiaries?
The named beneficiaries do not obtain an interest in the assets of the Discretionary Trust nor do they obtain any right to distributions from the Discretionary Trust. The distribution of income or capital by the trustee may be made to any member of the defined set of beneficiaries which includes the named beneficiaries as well as those people set out in the Schedule – which contains a list of other eligible beneficiaries defined by their relationship to the named beneficiaries.

Including children as beneficiaries

If a couple and their children are to be listed as the named beneficiaries, in some cases it may be preferable that the children are not named separately. In this case, the words “and any of their children including their future children” could appear after the couple’s names. For instance the named beneficiaries could be listed as “John and Jill Smith and any of their children including their future children”. This means that all of the couple’s children will be deemed named beneficiaries and the trust deed need not be amended if that couple has children in the future. However, you should keep in mind whether children from either person’s former relationships are to be included as named beneficiaries.

3. Which Jurisdiction Applies?
When choosing which jurisdiction applies to the Discretionary Trust Deed, your answer will have the effect of an agreement between the Trustee and Settlor defining the laws of which state will apply to the Discretionary Trust Deed. You should choose the state in which the Discretionary Trust Deed is executed. Other relevant considerations may be the location of the Discretionary Trust’s business (if any) or its Trustee. If this question becomes relevant in the future, the parties’ intention will not be determinative of the issue of jurisdiction but it may be relevant.

I hope the above can clarify and correct some points been explained.

[email protected]