Refferral required for a professional that can help set up a Trust for Property Investing

Hi

Lawyers are the first point of call, they will assist in setting up your whole structure.  Accountants are not legally allowed to do this and are not covered by their insurance for doing this.  Many however do.

While many Accountants will not like what I say below, I am just stating the technical legal position.  The intention of the legislators has not changed or otherwise they would have allowed tax agents to provide legal services related to tax law under the Tax Agent Services Act 2009

 Accountants do setup trusts, but they should not technically be discussing who the appointer is or the benefits of a corporate trustees are unless they also have a lawyers practicing certificate.  They should not be discussing Asset Protection.  If they do it wrong there insurance will not cover them as their insurance policies specifically preclude engaging in legal practice.

Courts have found that even an accountant filling in the details of a trust deed which has been prepared by lawyers still constitutes legal advice and they have no authority to do so.  Courts have also found that the following constitutes legal advice and can not be done without a current legal practice certificate:

1. providing advice about Director's obligations

2. Drafting trustee resolutions

3. Interpreting a trust deed

4. Providing a trust deed to a client from a website

Interestingly enough, even though it is a widely held belief of Accountants, they are not allowed to provide advice on Tax Law, even if provided in relation to the preparation and lodgement of a tax return. (Sinclair v Commissioner of Taxation) except if they are a licensed tax agent and the service is limited to:

1. ascertaining liabilities, obligations or entitlements of an entity that arise, or could arise under a taxation law.

2. or advising an entity in relation to 1.

Although even more Accountants would do the above.

The biggest problem in Australia is that Accounting is not a licensed or protected profession.  Anyone can call themselves an Accountant.  Anyone can practice as an Accountant without insurance.  There is a restriction on tax agents or by the associations CPA, CA etc but not a legislative one.

Accountants are losing more and more of their ability to provide services.  From 1 July 2016 they will no longer be able to provide SMSF advice without an Australian Financial Services Licence, because that is providing financial advice.

There are great accountants out there (as the ones on this forum) and I will always recommend that you take my structure to an Accountant so that they can advise you on the liabilities, obligations or entitlements of an entity that arise, or could arise under a taxation law.  T

It is not just the deed that is important, but how the trust is conducted is important.

eg. I had a client which was a company trustee of a discretionary trust. The trustee had been giving mum a distribution for years. But this was only a paper distribution with no money ever paid over. It was what they call a UPE, unpaid present entitlement. over the years mum was 'owed' about $200,000 by the trust.

Mum died. Guess what happened next – the executor of her estate was legally obliged to call in any money owing to mum. They asked the trust to hand over $200k. The director of the trustee was the son. He refused to believe there was a loan and he refused to play ball. The trustee was sued in the supreme court and the trust lost. The trust now has a judgment against it. Thousands of dollars have been lost in legal fees and now assets of the trust are about to be taken to satisfy the judgment debt.

This is just one example.

Another example is losing control of the trust. Look at the reinhart problems in the NSW Supreme Court. It is possible for a beneficiary to apply to the court to remove the trustee and appoint another trustee. Don't forget the trust assets do not belong to you or hte trustee, the assets belong to the whole of the beneficiaries of the trust. The trustee is just the legal owner for their benefit.

Thanks Richard,

The solutions are to be aware of potential problems and ask yourself what could happen. You can't plan for everything, but you can plan for many things. It is just knowing what could happen.

Another potential problem is death (usually a problem to the deceased!). If you die any trust assets do not pass in your will. Roles don't pass either. So 'your' trust could fall into the hands of someone who you wouldn't want to control it.

I had another client whose father died and the son was the back up appointor of the trust. So on death of dad he was the appointor. But he didn't know this. It took him about 7 years to come across this fact. I think it only surfaced after the death of his mother who was the director of the trustee company. The trust fell into the hands of other family members who were manipulated by the family accountant who milked the trust. Records are missing so they don't know how much money has disappeared but it is substantial.

Hi All

Yes,

Darryl is right

always go first to a lawyer as they have insurance to protect your position,

They tell you they are experts but they can still get it wrong, and

Not many law firms have experience in depth in SMSF law because 99% only just discovered them.

Ask John Symonds about lawyers, He is having to sue Gadens for $11M,

 because they apparently caused a   F.Up with his work and allegedly cost him that.

Isn't that a comforting thought?

When they are wrong you have to sue them, if they were honorable men why don't they just pay up?

No if they get it wrong you must fight their PI insurance company as lawyers must not admit liability.

Promise every thing and admit nothing.

Great system and we all know you can trust a lawyer.

Am I unfair ?

No, just been disappointed.

Anthony

Have to disagree about a 1 stop shop in Brisbane for everything Tax wise.

Steve Hodgkinson from the Gold Group who is a contributor to the site is an expert on SMSF and covers every area of the business from structure set, up Tax returns and SMSF Audit.

He has been my accountant for 15 years and we finance 101 of his SMSF clients.

Remember not all Accountants are set up to carry our SMSF Audits.

Cheers

Yours in Finance

Hi DaOne,

Sorry about the delay, I just found your email in my spam box.

Will call you tomorrow.

Terry

Hi Anthony,

Yes, I agree with much of what you had written. I had assumed you were talking SMSFs because you mentioned it above:

"Not many law firms have experience in depth in SMSF law because 99% only just discovered them."

I am a lawyer, but don't subscribe to the law society precedents (as I don't think they are very good).

I agree that accountants can provide limited financial advice. But I believe accountants are not able to give legal advice. The setting up of structures involves the provision of legal advice. Most accountants think they can get around this by just using a deed prepared by lawyers, but advising a client on the positions of the trust such as who should be trustee and how to structure the appointor, etc is legal advice. Would the standard accountant's PI insurance cover them for this if things went wrong? probably not if they are giving legal advice. So a client suing an accountant may be left with nothing to sue but a $2 company.

If a lawyer set up the structure and stuffed it up then the client would be able to sue the lawyer and the lawyer's PI insurance will usually cover them.

Hi Darryl, Terry and All

No, it is not against the law to provide legal advice.

It is only illegal to charge a fee for doing so.

Anyone can give as much free advice as they choose. The legal profession act in NSW and other states only proscribes a non legal person charging a fee,

This is because lawyers are all mostly about money, and what they want and need is a protected environment in which to operate. Also passing the buck to an insurance company and making others responsible for your mistakes tends to make you care less about how you perform and about outcomes for clients.

I think if more lawyers were into giving free advice the prices would tend to reduce and a better system would be where they provide a binding quotation rather than the open ended Costs Agreement that has no upper costs limits.

In my view this is a long overdue consumer protection that should be initiated.

Don't forget Darryl we are all allowed an opinion, that's why we come here to share them with others – for free.

Regards to All

Anthony K

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