Hey peoples, I was about to purchase an IP in my name with the equity on my home when I read its the worst thing to do! So I am now looking at trusts.
My brother and myself will be in the trust. I am also in a partnership with my wife for our business.
Should I draw down on my equity for a deposit using the trust to purchase?
In doing that does that mean there is less danger because I will still have most of the equity left there?
Should I become a sole trader boosting my servicing ability and lowering my wife to the bottom tax bracket?
With my wife dropping to the lower bracket what sort of trust will take advantage of this situation?
Its my first IP should I just buy one in my name ($200k) and transfer after the trust is set up or will this incur great cost?Love to hear your viewpoints!
nejasHi Nejas
Firstly welcome to the forum and I hope enjoy your time with us.
Yes i am not a great advocate of keeping anything in my own personal name for a variety of reasons.
Personally i think before you go forward you to need some proper loan advice as dependant on the type of property and your own individual circumstances and objectives will determine the entity you would probably use for the acquisition.Do you run your business as a Family Trust or solely as a individual partnership ?
Do you you and your brother have dependants if so you may wish them to be beneficiaries.
Is the property positive / negative or neutrally geared.
What is the age of the property ?So many questions probably not right for an open forum.
Feel free to drop me a line if you decide you need further advice.
Richard Taylor | Australia's leading private lender
Hi
Which type of trust you should use will depend on your exact situation – maybe a unit trust (as 2 parties) or a discretionary or a combination (hybrid) or both Unit trust with units owned by your discretionary trusts (one each).
You should seek some professional advice from your accountant in conjunction with your mortgage broker when setting up a trust – who will be trustee and named beneficiaries will have far reaching consequences.
If you have equity you may want to lend this to the trust to get it started, but this will leave you exposed to creditors if you go down. If you gift money to the trust, then you may have tax problems as you may need to borrow to gift and then would not be able to claim the interest on this. Your trust may be able to take a mortgage over your property etc, to tie up the equity and make the property less attractive to creditors if you are sued.
Not sure what you mean by becoming a sole trader to boost serviceability though.
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 very insightful. Just finished with my accountant she suggested a family dicretionary trust. In her opinion hybrid is frowned upon by ATO and new laws have come in and according to her they will become a thing of the past! What I meant by sole trader was in a partnership my income is split, if I decide to be a sole trader I will have greater serviceability wont I? As well as droping my girl to the lower income bracket to benifit from the trust as a benificiary. I am new to this but is that a basic understanding?
My brother and his wife are in the top brackets so he cannot see any beifit to him as far as benificiares are concerned, the only good thing to him in this trust is pooling funds and asset protection.My accountant also has many IP's in her name and says she has all the insurance and is not worried at all about being sued!
nejas
Have just sent you an email in response to yours.
Richard Taylor | Australia's leading private lender
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