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To use a Trust or Not?

Discussion in 'Accounting, Tax & Legal' started by Dingo, 21st Dec, 2009.

  1. Dingo

    Dingo New Member

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    Hi,

    This topic might have already been covered?

    I guess it comes down to personal choice and circumstances, but what is the general view on using trusts?

    Accountants say yes, but is that because they make money from them?
    My financial Planner thinks they are no good and would only be a benefit if I went bankrupt (hope he doesn't try and push me that way ha ha)

    I am interested to know peoples thoughts.

    Cheers
     
  2. PJCA

    PJCA Member

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    Asset protection is just one aspect of a trust, another is the ability to minimise tax especially in a family type arrangement.
    There are so many considerations to take into account it is not possible to provide a blanket response, suffice to say that trusts offer unparalelled benefits in the right circumstances.
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    It very much comes down to your personal situation and your goals.

    The main benefit of trusts is for asset protection - but unless you are in a high-risk profession or are the director of a business, you may not need that level of protection.

    There can be tax benefits as well - but you also lose some other tax benefits such as negative gearing, so it depends on your circumstances as to whether you would be better off with or without a trust.
     
  4. Dingo

    Dingo New Member

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    Thanks PJCA and Sim,

    My accountant says I need one (but not sure if there saying this to make money from me) my financial planner says I don't? (he had a trust before he got married, then got married and divorced and lost everything)

    I understand that it comes down to personal circumstances, And I guess I need to speak to a few accountants and see what the general view is

    Thanks again
     
  5. PJCA

    PJCA Member

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    Ask your accountant what the benefit(s) will be. Unless your situation is extremely complicated it should be obvious whether the proposed structure is beneficial. If you're not happy with the response then try another accountant.
     
  6. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Yes, family law courts (or whoever it is who deals with these things) can ignore a trust when settling divorce proceedings. Family trusts don't protect you from your spouse!
     
  7. Superman

    Superman Well-Known Member

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    Dingo - some tips for you:

    1. Yes - accountants make good money from setting up trusts (so do lawyers). As long as you feel that you are getting good value in terms of the advice there is nothing wrong with that.

    2. Don't take tax advice from a financial planner (unless they are also a practising and qualified accountant - however in my experience you can have both qualifications but you can't be an expert at both). Basic tax advice is OK - but a financial planners primary concern is to help you reach your financial goals (i.e. make you lots of money) - not to save you tax.

    3. Divorce can make people awfully jaded - I am sure your financial planner before his divorce would have used the trust quite successfully to legitimately reduce his tax and protect his assets from everyone apart from his spouse (but did he tell you about that?)

    The other replies to your post from Sim and PJCA are correct - listen to them.

    If you are shopping around for advice from different accountants do you actually trust the accountant who recommended the trust (assuming it is your current accountant)?

    Your accountant should know about your personal circumstances and should be providing appropriate advice for your situation - that is what you pay them for!

    Hope this puts a different perspective on things for you.

    SM
     
  8. GregR

    GregR Reid Consultants

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    Dingo,
    I agree with all the others have said.
    It depends on your need whether the additional costs are worth the benefit.
    If you are a business owner, asset protection and potentially income distribution if you are making money are benefits. There may be some estate planning issues to consider for children and asset distribution.

    If you are an wage earner and investor, then it may make sense to have another legal entity re land tax issues and if you are positively geared, income distribution.

    If you are still negatively geared and will be for some time, the use of trusts becomes more limited to obtain any negative gearing benefits.

    Ask your accountant what the benefits are for you now and in the future. If it is simply for marriage (or divorce) asset protection, the family court simply ignores trusts.
    Good luck
    Greg
     
  9. Saskatoon

    Saskatoon Well-Known Member

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    Dingo,
    have a look at the info on this site:Tax Professionals Welcome.
    Plenty to read!
    (not a recommendation for their services - I have no involvement with them!)
     
  10. Magpie

    Magpie Active Member

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    Hi Dingo,

    I don't have the professional experience that other posters have, but I did read an opinion recently that said that changes in legislation had reduced the usefulness of trust structures for many people, unless their specific circumstances called for it. I don't know how true that is, but it fits with my own perceived bias, which says that governments are constantly seeking to nibble away at anything that looks like too much of a good thing. :rolleyes:

    As a general rule of thumb, it seems that most structures will give some benefits at the cost of imposing other restrictions, costs, or additional work. It usually does boil down to needing to have a clear idea of exactly what your own circumstances are and which are the swings and which the roundabouts for your particular case.

    Chris