How many trusts?????

Hi Terry,

You say you use a separate trust for each property you own. Few questions:

Do you act as trustee or do you use a corporate trustee?
If you use a corporate trustee, do you establish a new company with each new trust, or use the same one?
If you use a corporate trustee, do you distribute to the trustee, or do you establish a separate company to act as beneficiary?

Sorry if these questions are too personal, if you like you can answer through PM.

Cheers

I have two trusts, a DFT that I use for long term investments, and a corporate trustee for all my developments. 

I have held up to 10 properties in my DFT at a time and don't have a problem with having so many in the one trust.   Using trusts to protect assets is no longer a fail safe solution these days.  Courts are starting to strip back the legalities of trusts these days and can even find that property held in a DFT can be deemed to be the property of the trustee in their capacity as an individual.

There may be merit in having several trusts for tax purposes but for asset protection, I would not bother setting up lots of trusts.

Cheers

K

Don't forget the trust assets do not belong to the trustee. They are just held in the trustee's name. So if one trust is sued the assets of that trust are at risk, but assets of other trusts should be safe –  even if the same trustee. Besides, the trustee can be sacked as soon as your hear of trouble.

Its like if you were sued all your assets may be at risk, but if you were also a trustee, then the assets of the trust would be safe(r).

Discretionary trusts are not 100% safe, but I think they are the best thing out there and still pretty safe.

Hey freelance

It's all quite complicated and being slugged out in the courts at the moment but what you have suggested is quite possible.

I suggest that you find a good property lawyer and get some solid legal advice.  Then go see an accountant and get their advice.  Then see if you can find a happy medium between the two!  I know it sounds glib but often lawyers and accountants don't see eye to eye.  The purpose of setting up trusts is to protect assets, minimise tax, provide for your family etc etc, without having the administration of those trust eating up all your profits.

I have found that two trusts does me just fine.  Having said that, as I continue to expand my portfolio I will probably set up another DFT and possibly another corporate trustee.  I think that would be ample for my purposes.

Cheers

K

Cheers

K

I only know of one case where a trust was attacked and that was the Richstart one, ASIC… In the Matter of Richstar Enterprises Pty Ltd ACN 099 071 968 v Carey (No. 6) [2006].

If you do a search on "richstar asic" you will find heaps of interesting articles.
http://www.google.com.au/search?q=richstar+v+asic&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-GB:official&client=firefox-a

Have a read
esp http://www.cgw.com.au/images/PresentationNotes13thSeptember.pdf is a good one.

If you invest in QLD another aspect to keep in mind is that each trust has a land tax threshold, so by holding your properties in multiple trusts rather in a single trust or in your own name can you most likely avoid paying land tax (depending on property values of course). I have essentially put units in pairs per trust and only a single house per trust to keep the land content well below the threshold and allow for growth. Not sure if this applies to other states! Talk to your accountant.

My legal advise has been similar to what Terry is saying, discretionary trusts are probably as safe as you can get, but without a company as trustee the asset protection is significantly undermined.