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Split Trust

Discussion in 'Accounting, Tax & Legal' started by Dave, 29th Sep, 2005.

  1. Dave

    Dave Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    57
    Hi all (especially nigel / nick or anyone who might have looked into this previously),

    This is theoretical only, but Im curious :p

    Lets say you have a wad of different asset types in a Family Trust.

    Lets say you've discovered this is bad for your asset protection requirements and want to divide them up.

    Firstly, you could create another trust / trustee cost say 2000, and transfer some of them over which would incur dreaded CGT and stampduty, cost millions.

    Or, could you 'split' the trust into 2, both would still have the same beneficiaries and same appointor, just write a memorandum that says A, B and C and are going to one trust and D, E and F are going to another. Any way of doing this without causing a resettlement?

    How else would you advise someone that had investment properties, share portfolios and were running say a doctor's clinic all thru the one trust? It's fine to say from the outset use different entities, but what could possibly be advised after the fact?

    Cheers,

    Dave
     
  2. Nigel Ward

    Nigel Ward Team InvestEd

    Joined:
    10th Jun, 2005
    Posts:
    1,172
    Hi Dave

    Yes you can do what you've described. It's a technique called "cloning". :D

    Seriously, yes it actually is often referred to as cloning your trust.

    What you do is create identical trusts (save for the name) e.g. instead of the Davo Family Trust you might leave the Davo Family Trust holding the shares, create the Davo Property Trust No. 1 to hold your real estate and the Davo Medical Trust to hold the interest in the practice.

    What you may then do is change the trustees of the DPT No. 1 and the DMT.

    There should be no CGT Event or stamp duty provided the beneficiaries are identical etc...

    There are some practical issues to consider though about the need then to change the registered proprietor for the real estate...so perhaps you might leave the original trustee as t'ee of the property trust...but the trustee co may also be counterparty to some contracts as part of the medical practice...so it might be easier to leave the initial t'ee as t'ee of the DMT...

    Also you should consider whether the form of trust you're using to run the medical practice is the best one ... there's some discussion at present re the ATO's view of Phillips unit trust arrangements used by most lawyers and accountants to run their practices...

    Hope this has given you some food for thought before seeing your lawyer and accountant...

    Cheers
    N.