Hi all,
Trying to decide whether I should setup a trust structure.
I’ve read WealthGuardian and have read through all the posts on forum about trust but I still would like to see some more real life data regarding trusts.
1. Has there been a case in Australia where a trust setup for property investing been sued and has successfully avoided losing the assets?
2. I’m not in a high risk profession and wouldn’t Public Liability insurance of 20MM cover tenants suing the landlord? If Public Liability insurance can cover me then I wouldn’t need a trust for asset protection given my level of risk.
Assumptions that I have glean:
* I was thinking if I had a trust then I wouldn’t be able to claim depreciation on the property or not enough of it to make a difference so it would be only good for properties that is very CF+ before tax.* A unit or hybrid trust used to claim tax would mean that I own share of the trust and thus could lose it if sued. This negates the main purpose of the trust (asset protection).
Am I wrong in my assumptions and does anybody have answers to the questions? I plan to meet with my accountant to get professional advice but just like to be armed with more knowledge before doing this.
Tony
Hi
I am not a lawyer, but will offer the following comments
1). Not sure. If the trust is sued, eg. by a tenant, then it can certainly lose its assets. The benefits are more for the portection if an individual sued, the individual doesn’t own the trust assets.
2) You may be cover by insurance in most instances, but not all. eg. there is one case where a person playing golf hit a person and was sued. He was not covered by insurance as it was a charity open day at the course.
another example. you are over a bit over the limit and smash your car into a pole. Council sues you for damages, but you are not covered by insurance as over the limit, or what if you hit a person. You may deserve to be sued in this case.
3) Trusts can claim depreciation. If you have a hybrid or a unit , then you own the units. These are ‘property’ and can be at risk if you are personally sued. But usually the trustee will still have the discretion where to distribute the income – with the HDT, not with the unit trust. You would also be the appointor of the HDT so you can control the trustee.
Terryw
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