Hi,
First of all thanks to all the members posting here, I'm happy that I found this place as there is so much knowledge to take in.
I have searched for this question but didn't find the answer.
I am currently investigating setting up a discretionary trust with corporate trustee to buy a IP (and hopefully continue buying over the coming years).
My question is, who can I list as beneficiaries? am right in thinking they must be defined when the trust is written up, changing them would mean resettlement?
Can the below be listed as beneficiaries:
My wife (yes)
My self (yes)
My future children
My mother
My father
My sister
My sister's future childrenAlso my understanding is that the trustee (in this case a company) can distribute income to any of the beneficiaries.
Can all the income be distributed to just one of beneficiaries? And can this change each year?thanks
scotts
Yes to all your questions. Because the life of the trust can be 80 years you might want to include remoter descendants than your children eg grandchildren etc
am i right in thinking i can also add a company as a beneficiary..
Yes, you can have whoever you like as a beneficiary. It's best when setting up the trust to include all and any posible beneficiaries, such as children, grandchildren etc, as well as companies of which you are a director etc.
It is at the trustee's discretion as to who receives a distribution from the trust for any particular year.
thanks very much guys
so i could then pass income to my SMSF (paying on 15%, but of course I won't have access to the money until i retire)
if i trade shares/forex/etc through another company, i can then pass income to them (which can be offset by any losses i had that year).sounds like a DFT is really the way to go.
Mistresses (and the male equivalent?)
cousins
step children
step grand children
adpoted children
any company in which a beneficary is a shareholder, director or secretary
any trust in which a beneficiary is appointor of, trustee or or unit holder of
etcMost deeds will be worked broadly so all these, or most, are included already
From lender POV, just be careful with naming beneficaries. Some lenders (the evil ones) require every adult named beneficiary to guarantee the loan. You may set up the trust so the wife has nothing to do with it, but is listed as a benefiary by her name. The lender may ask for a guarantee from her. You don't want this as it will hurt her serviceablity and adds to your risk.
or worse . You could have set your trust up, gotten a pre-approval and then exchanged contracts. You then go for a full approval and then the lender suddenly asks for the details of Mr X, a son of yours, who is named in the deed as a beneficiary. X has bad credit and doesn't want to give a guarantee anyway. But the lender won't budge and refuses to go ahead without him giving filling in an app form and giving the guarantee. This actually happened to a client of mine with a lender called RAMS. We quicklyhad to rush another application in with a different lender nad he nearly lost his deposit.
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
Terry thank you very much for the reply.
I'm a little confused now, so should I name as little beneficiaries as possible ? or hope that the lender doesn't ask beneficiary to guarantee the loan and if they do look for another lender..
because i dont want the beneficiaries to have anything to do with the loan, specially my wife as she will be looking to lend also.or can you use words for beneficiaries like Wife, Mother, Father… or would it make no difference to actually naming them?
I think you should try to use descriptions such as wife, husband etc and not specific names – but this may limit the extent of beneficiaries. eg. you may have a friend and name him, and then all the wives, husbands, children etc of him may be included. But if you don't name him they wives etc may not fall within your description, but he could still be included by being a shareholder of a company in which you also hold shares.
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
The deed usually names Primary Beneficiary/s, then has following beneficiaries, such as,,
the spouse of the primary beneficiary,
any children of the primary beneficiary, etc.
A word of caution with discretionary trusts……if the property is being negatively geared losses are trapped within the trust and can only be applied against future income derived by the trust.
My wife wasn't born in this country. She is a permanent resident now but her family still live overseas. We have a couple of discretionary trusts set up.
The trust deed specifies that the beneficiaries are us and our families etc, but what is the law when it comes to my wife wanting to distribute the trusts income to her mother and father?
She can, but there are tax consequences. Non residents have to pay 29%+ tax with no tax free thresholds.
It is good to have the option to distribute to them even if you don't as the rules often change and it may be beneficial in the future.
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
A couple of quick questions regarding DTs…
1) What happens to the assets the trust holds after 80 years? i.e the 80 years nominated within the trust deed…
2) When our accountant set up our DT he nominated both my wife and myself as trustees and as beneficiaries, but I read above that having my wife as a trustee may not be good?
3) How easy is it to amend the trust deed in a few years time to add a corporate trustee if needed?
Cheers,
.
After 80 years the trust comes to an end and its assets are transferred to beneficiaries.
Why have 2 trustees? If just doubles the risk and possibly reduces long term borrowing capacity.
It is very easy to change the trustee – you just have a meeting and the appointor appoints the new trustee and the old retires. but if your trust owns property you will have to arrange for the title to be changed and if it has a loan you will have to re-apply again and may have exit/entry fees.
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
Is it possible to have trusts with lives longer than 80 years?
I think Ed Chan talks about their "Property Investment Trust" having a longer life, but is it possible to prepare this type of trust anywhere?
You will struggle these days to have too many lending options using a PIT or Hybrid Trust structure.
Richard Taylor | Australia's leading private lender
YoungInvestor wrote:Is it possible to have trusts with lives longer than 80 years?I think Ed Chan talks about their "Property Investment Trust" having a longer life, but is it possible to prepare this type of trust anywhere?
There is something know as the law against perpetuities which was designed to prevent rich families passing on their assets within trusts and going on forever. This is an old English common law which was brought over to Australia and each state developed legislation along these lines similar to the British. The only exception in Sout Australia. I've spoken to a few trust lawyers about this and they say it is not a little unknown secret but knowledge of how to get around the law of perpetuites with trusts has been around for years – what is unclear is the extent to which your trust must be within SA. eg. is it just the trustee's location, the state of registration of the deed, the directors of the trustee, the location of the office of the trustee, state of incorporation of the trustee company or is it the location of the real property of the trust. All this is unclear and you may only find out in 80 years!
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
Hi Terry,
Thanks for the quick reply… very much appreciated!
I had the trust drawn up last month, and the deed has been stamped. The trust also has a bank account, and a comsec account but no property or shares as yet.
I like the ability to drop one of the trustees, however I am now unsure what implications this will have on:
1) the existing bank account
2) the existing comsec account
as these accounts are both in the following names, XXXX & YYYYWill I have to notify the banks, and have them change the account name to just XXXX ATF once I have had this ‘meeting’ to remove my wife as the secondary trustee? Or can I leave the accounts as they are?
Also, is the process the same to add the corporate trustee, i.e. have a meeting, and add a corporate trustee?
Thanks in advance,
.
Adam
Yep you would have to notify the bank as the trustee is the legal owner of the trust property so the bank account must reflect this. Same with adding a company.
If your trust is only going to be buying shares then the trustee doesn't matter so much. There is little risk of the trustee being sued – or none really – in owning shares so a person can work well. But if you are getting loans etc and/or buying real property one trustee would be better and a company would be safer still- with only 1 director.
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
How is a company safer as a trustee? And why do you say only 1 director?
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