Hi everyone,
For all the company/trust structure experts out there, could you please help me with this one?
I am about to purchase an investment property under a company/trust structure. I have a discretionary trust (trust ABC) and a company(XYZ Pty Ltd) as trustee for this trust. So I need a bank account for the trust to collect the rental income and pay the expenses. When I go to the bank, they set up two profiles, one is for the XYZ Pty Ltd company, the other one for ABC trust. Then they set up an account under the name of ‘XYZ Pty Ltd In Trust For ABC trust’ and link this account to the XYZ Pty Ltd company profile.
My question is, is this structure right? I asked them to link the account to the ABC trust profile, but they told me because the trust is not an entity( it’s just a distribution tool), they can not open an account under the trust’s name.
My concern is with this way the bank setting up the account, will it appear that the company XYZ Pty Ltd is trading? Because what I want is the company doesn’t trade, but the trust trade. The company is just an empty company that doesn’t do anything, only for asset protection purpose.
Is the way the bank set up the trust account correct? Or is there any other way to set it up?
If anyone has experience on this field, please share your experience with me, that will be much appreciated.
Thanks a lot for your help!
Vivian
Hi Vivian,
The trust is not a legal entity, the trustee is. As the trustee is the company, the bank account should be in the name of XYZ Pty Ltd as trustee for ABC Trust. So that part looks ok to me, as long as it has the name of the trust on the account.
I'm not sure what you mean by company and trust 'profile', I might leave that one for one of the MB's or bank gurus around the place.
Hi Dan,
Thanks for the reply.
My concern is, how can the ATO or court(if the trust get sued) know that the property is owned by the trust, not the company? As we don't want the company to own anything or do any trade.
In the structure the bank setup, it looks like the company is the legal owner of the property, but we want the trust to be the legal owner of the property.
Hope i am not confusing people…..
Thanks!
Vivian
The trust can not be the legal owner, because the trust is not a legal entity. As long as the bank account says 'XYZ Pty Ltd as trustee for ABC Trust', that will be fine.
The company is the legal owner, but is doing so as trustee for the trust, rather than for itself.
Trust assets can be identified in a number of ways – but the title is always with in the name of the legal owner = trustee.
– Firstly you will often have signed contracts as XXX Pty Ltd as Trustee for the ABC trust.
– There will be other correspondence such as letters with conveyancers.
– There will be tax returns showing the trust is operating the assets
– The trustee's tax return will show nil
– You company will have no other role (or shouldn't)
– There will also be minutes of the trustee or the trustee's representatives showing their decision
– The trustee can also lodge a caveat on the title showing that they own the asset as trustee.
etcTerryw | 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
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