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Property Investment & Trusts

Discussion in 'Estate Planning' started by smudge01, 26th Dec, 2011.

  1. smudge01

    smudge01 New Member

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    26th Dec, 2011
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    Location:
    Brisbane, Qld
    I've been trying to find out why I would use a trust for property investment. So far all I can see is "asset Protection" but there's not much info on what the risk there is either. But my accountant is recommending using one.

    I'm interested in views on why I would need (or why its advisable) to use a trust. So far the only real beneficiary seems to be the accountant ;)

    I have no dependents and have no intent on leaving "an estate" to anyone.

    Any pointers most welcome.
     
  2. Terryw

    Terryw Well-Known Member

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    Location:
    Sydney
    Tax minimisation and flexibility.

    If you have no other family now that the trustee would distribute to then you may in the future. Even if you never have anyone else you would have the option of distributing to a company and capping the tax at 30%.

    The trust gives you the flexibility to change things.
     
  3. Matthew38

    Matthew38 Member

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    17th Feb, 2012
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    Location:
    Melbourne
    The key reasons for using a trust to hold investment assets such as a property are:

    Tax benefits: you be able to reduce your tax bill by distributing income to family members with lower taxable income. As Terry pointed out if you were distributing the income to a company then hat income would be taxed at the company rate which is 30%. However, if your individual tax rate is lower once the investment income is taken into account or you don't have any other family members with a lower taxable income or you don't want to incur the additional cost and complexity of running a establishing and administering a company then there is no advantage from a tax perspective.

    Asset protection: trusts allow you to control and receive income from assets without having them in your name. This may protect these assets in the event that you are sued, bankrupted or divorced. If you have no spouse, or dependents or children from other marriages or are engaged in high risk business practices or a high risk business with substantial public liability exposure that may lead to bankruptcy then this reason may not apply.

    Estate planning: some trusts may allow you to effectively pass assets on to future generations without paying excessive taxes or going through estate disputes. As you have stated that you have no intention of leaving an Estate then there is no benefit from this perspective.

    The cons to establishing a trust to hold your property investments are primarily based around cost and complexity. Obviously the cost of establishing the trust can be high, the ongoing administration of the trust generally incurs an annual cost and if in the future you decide to unwind the trust and transfer the assets to another party or yourself, it can be costly and have tax implications.
     
  4. realestate_basket

    realestate_basket Member

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    11th May, 2010
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    Location:
    Sydney, Australia
    Hi Matthew,

    What is the cost of setting up a trust and its running cost per year?

    I did a quick search online and it's around $2500 to set up, is it about right?

    Also, what are the tax implications if we want to transfer assets from a trust to other parties in the future?

    Thanks
     
  5. Terryw

    Terryw Well-Known Member

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    9th Jun, 2006
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    Location:
    Sydney
    Setting up a trust could cost you nothing or it could cost you up to $20, 000 or so. Its not advisable to set one up yourself as there are many traps for the unwary so it would be best to get some advice and get it done properly. The average professional would charge between $1k and $2k depending on the set up. In many states there would be stamp duty as well. In nsw this is $500.