Changing the Trustee name in a DT

Resettlement of the Trust can occur with the changing of the Trustee (and CG can result, however it depends on the State the trust was registered in and whats written on the trust deed), however unless you need to change the trustee regularly or setup a corporate trustee for a particular purpose it should be okay to leave it as it is (search for TerryW, hes pretty helpful at trusts, etc).

“My accountant has advised me that having our names listed as the trustees defeats the purpose of setting up one! Is that so?”

Um not really. The trust is separate entity from you. If you run the trust completely separate from your personal lives and business lives (separate bank accounts / trustee meetings / etc) it should provide asset protection. A trust also allows incoming splitting which means you can save money from the tax man (of course asset protection is always the first reason you give for having a trust!). So there are multiple benefits towards having a trust.

I am in Thailand atm and don't have my law books with me, but from memory…

its a painful process to change the trustee.

Firstly, you will need to change the name on the title deeds,
Then you will have to  redo the whole loan again as the borrower will change, though the guarantors may be the same.

lots of running around.

Stamp duty should only be nominal but you will have to prove to the OSR that the trust hasn't been resettled. Resettlement shouldn't occur unless you change the end date of the trust or add or remove beneficiaries or change it in other ways.

I think the ATO has been looking at resettlements lately, you should check http://www.taxlawyers.com.au and look for 'resettlement'. They didn't like people cloning trusts (which involved setting up a new trust exactly the same and moving some trust assets to the new one – and later changing trustees so separate people ended up controling what was once one trust.).

So you will probably need legal advice too.

ideally it would be best to have a trustee as a company in case the trustee is sued, but having yourselfs as trustee is still much better than owning just in your own names.

We have some trusts with ourselves as trustees as being an overseas investor I wasn’t able to get a resident director for an australian company and so could not get a company as trustee. I have now found a nominee director who can do this so future trusts will be with a company as trustee. I looked into changing trustees and as Terry says it’s a hassle but can be done and I will do some time in the future. If you have yourself as trustee and beneficiary the asset protection is reduced compared to using a company as the trustee.

God of Money, I agree that the portfolio needs to be a reasonable size to justify the use of trusts, but the costs to set up the trusts and the annual accountant fees are not that high in my view. The proper use of trusts also allows you to avoid paying land tax in QLD as each trust has its own threshold so if you don’t put too many properties in one trust then you pay no land tax. Since the bulk of my portfolio in QLD this was part of the consideration.

As for the need to have solid asset protection, that depends on your risk aversion. In general I am not very risk averse at all but since my intention is to build a large portfolio of property I will have the majority of our wealth tied to that portfolio and using trusts will maximize the protection of that wealth – everywhere in the world people are getting more and more litigatious. Changing to a trust structure later on is expensive so I’ve decided to go for maximum protection now.

The other consideration is estate planning (incl. taxation) which is much better handled through trusts. I am too young to really give this much thought but as my (grand J ) plan is to build a large portfolio and never to sell when I do finally kick the bucket it will help to have this properly structured / addressed.

But in the end this like most things in property investing is just one way of doing things and I know people who hold a portfolio of 10+ more properties in their personal names (different ownership ratios though) and are very happy they went that way… as always best thing to do is to consider what is important to you, your situation, educate yourself, get good advice and decide what’s best in your case.

Setting up a company costs about $400 to $500 these days and the yearly fees are the ASIC fee of $250 (approx) and tax return. But the tax return will be nil as the trustee company wont be trading. So your accountant won't charge too much extra for this.

Also, companies add advantages from a boorrowing point of view. Say you own a property and have heaps of equity, but have a default to the ATO for $2000 for a bill you missed. You won't be able to get decent finance. But say you had a trust with company as trustee. You could resign as director and put in a relative or spouse as director and then get the loan – a decent loan at a good rate.
I have had clients sell properties to family members and pay stamp duty to try to get around this problem.

But there are also disadvantages in that some loans are not available to companies.eg many low docs.

Thanks for your info Erik

Yes MJ. The trust will need to lodge a tax return as well as the company.

Also note that even if the trust is established and does nothing and has no income etc you will need to lodge a return.

You may not receive a notice from the ATO. They only send these out to encourage people to do their returns on time.

Due date would be the same as company/individuals which is the end of Oct I think, but if you lodge thru a tax agent this is extended till next year.