Hi
I am trying to get my first IP on the right structure from the start, regarding asset protection and ability to finance in order to get more IP.
But some people said that it is not necessary because landlord insurance will cover all the legal cost, and I am a employee. It is less likely someone will sue me. ( my husband has business, but I am only an beneficiary and a part-time staff of his business and another company I work for.)
I want to ask if it is really too much to put my first IP on the trust? If it is on Trust,
pro: 1. don't need to transfer IP from personal to trust in the future.
2. trust can carry the loss year after year and can distribute any gains
3. protect other asset I have.( although atm there is none.)
Con: 1. expensive to start up, trust set-up fee, and yearly tax return fee.
2. I earn 20-30K per year on my part-time job, there is not much benefit for me yet.
( If I get a CF+, there is not much for me from Tax benefit, If I get a CF-, there is even nothing for me. But my husband's business can be benefit from it, if his business set this trust as his beneficiary? )
3. Trust has less Tax benefit than Personal. Because if it is under personal, a accountant can foreseen what my annual income is and ask tax withholding variation on my PAYG. I will get benefit straight away. ( However, as an annual income 20-30K, I don't pay much tax already. As a beneficiary of my husband's business, I will not know how much I will get until tax time.)
4. Trust is hard to get finance, because there is no credit history on new trust. and I am the only guarantor will be on the loan.( I only have one car loan start end of last year and will be paid off in July this year, no credit card, no accounts.)
5. from Asset protection point of view, I don't have enough to be sued. Landlord insurance will cover the cost. (unless I am sued at work, which )
I think I am getting to be steered away from having my first IP on Trust
Hi there
Best thing you can do is sit down with a good IP savvy accountant and listen to what they have to say.
Where are you based?
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Oh – and depending on the trust type, it's not usually harder to obtain finance (particularly for normal discretionary trusts). It doesn't matter if the trust and trustee company are newly established.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Thanks Jamie, I am in Sunshine Coast.
Richard Taylor has recommended a Brissy accountant a few times- would be worthwhile checking with them if they're taking on new clients.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi .
There is a Accounting firm called Grow Accounting in Maroochydore they specialize in Property and the correct Structure to have the Investment Property in.
They are very good .
Regards Kerry
A trust is a legal person, but a relationship and only solicitors can advice on setting up trust relationships.
Some of your points are misguided. A trust cannot protect other assets you have for example. The asset protection aspects arise because a assets held by a trustee of a discretionary trust are not assets of any one beneficiary and generally won't fall into the hands of creditors if any one beneficiary were to become bankrupt.
It is generally no harder for a trustee to get finance than the same trustee borrowing in their own right.
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
I think it is a bit clear now.
If the property is under discretionary trust
If I am personally get sued/bankrupt, the creditor will not go after the asset that held under discretionary trust. if that is the tenant trying to sued the house owner, which is the trust, then most likely, the landlord insurance will cover the cost to its limit. The tenant will not go after me as personal.
If the property is under my personal, the landlord insurance still do its job, but the creditor will go for everything I have. It doesn't matter for what reason I am sued or bankrupt.
On the tax saving point of view, I really need to work out which is more beneficial. End of the day, they are different topic. I just trying to be a tight ass to save some pennies i guess.
I have another question. An Account can set up trust, a solicitor can set up trust as well. Is it possible for a solicitor know the tax law as well as property law? Is it conflict of interest to do both?
How does everyone's professional work together?
a lawyer charges every phone call, email they make. when we first rent our shop, we didn't know it is different from residential rental, we wanted to change couple of things in the contract, it cost us $500 for the phone calls charged by the lawyer.
We do have some trusts that set-up by accountant. I am not sure it is easier to get a solicitor to do brand new one. or go back to fix those up.
Not correct againShelbyduck
If you are bankrupted a creditor may go after the trust assets. And they may be successful to a certain extent depending on the structure of the trust, terms of the deed and how it was used.
If a tenant sues the owner of the house then they will sue the trustee. If this is you your personal assets are totally exposed.
If the property is in your name or under a 'trust' either way you would have insurance and this will probably cover most event.
Funny comments about tax. There is no conflict of interest for a lawyer to advice on tax. Taxation is covered by legislation and regulations – ie laws. Laws are something lawyers advise on, but tax agents can also advise on. However tax is only one small consideration with trusts and tax agents could advise on the non tax aspects:
1 asset protection
2. succession
3 control
4 corporations act
5 fmaily law issues
6 bankruptcy issues
7 terms of the deed
etc
Only a solicitor can set up a trust. An accountant would sell a deed prepared by a solicitor. They can't legally do this in my opinion and in the opinion of the Courts – recent WA case states this is legal advice.
Some accountants charge by the hour, and not all lawyers do. I am a lawyer and a chartered tax advisor and I charge on a fixed fee basis.
Whether you need a new trust or can use the existing will depend on the terms of the trust, where you are buying and how it has all been structured.
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
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