To trust or not to trust??

Hey Anthony,

Asset protection can be a valueable thing – particularly for those in litigious industries, ie doctors, lawyers, developers.

You will need to look at whats the real chance of you being sued and whether its worth it. In terms of our clients, I would say <10% have their properties within a trust, and of that most only have *some* within a trust structure, generally in relationship to mitigating land tax as their portfolio grows, than asset protection.

Overall I do see a lot of text book educated first time investors bring it up as it’s something they’ve read, but not a whole lot who are advised from their lawyers/accountants etc come out the other end setting up the structures as the cost/benefit isn’t necessarily there.

Keep in mind that having your properties within a trust will reduce your borrowing capacity with a number of lenders so it may be something which will create further drag on your ability to build a portfolio.

The answer to most who ask me should they use a trust to own property is ‘probably not’.

The risk of being sued is overstated by spruikers who try to make money out of selling trusts – most of them unqualified too.

Tenants can and do sue, but it is very rare. I have been investing in property for over 20 years and no tenant has ever attempted to sue me – except perhaps in the tribunal over minor lease disputes. But hold a property in a trust won’t protect the property because they will sue the owner of the property which will be the trustee. Trustee is indemnified out of the trust assets so all the assets of that trust will be at risk – but your personal assets may be at risk.

I think the great danger would come from if you are in business. There are always disputes in business so this can be very risky. But I have been self employed for about 15 years and never been sued. I have had some disputes, but never that serious. But I have sued a client in court myself. That is risky potentially as if you lose you could be up for costs.

I advise on asset protection a fair bit yet I have only seen about 5 or so people end up bankrupt. So it is pretty rare.

Keep in mind that there are other ways to ‘protect’ assets without those assets being held in trust.

Hi Azanatta,

Some of the answers that sprang from the linked thread in this post:-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/page/2/#post-5023378
…. provided some clues re “other asset protection methods”. Check it out.

While in there (the “big picture” thread) do have a look around at other subjects approached in other replies to that thread. You could find some quite interesting reading…..

;)

Benny

Ethan

Trusts can actually increase serviceability in many instances.
Trusts can negative gear just like a person can
Land tax on the first dollar is only for land in NSW. In QLD a trust owning land gets a separate threshold for example.

With serviceability it is not a matter of which lender, but the situation and the structure.

Land tax is too complicated to list the differences across all states. Even comparing 2 states is complex.
In QLD each trust could get a separate threshold of $350,000. Same with companies.