"Best" State to form a Discretionary/Unit/Hybrid trust

Discussion in 'Legal Issues' started by coins, 11th Jan, 2020.

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  1. coins

    coins Well-Known Member

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    Each states have different laws so I was wondering is there a such thing as a "Best" State to form a Discretionary/Unit/Hybrid trust? Which states are considered the best and which are the worst?
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Get legal advice from a lawyer. It generally doesn't matter
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You also have 3 aspects to consider
    1. Duties act laws on the formation
    2. duties act laws on readjustments
    3. where the land is located - if any.
     
  4. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Not sure what "best" refers to but consider that Hybrid Trusts will severely limit your lender options (most lenders don't accept HT's) and Trusts in general will limit your borrowing options and may affect your servicing/borrowing capacity.
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    All lenders that lend to trustees of discretionary trusts will likely lend to trustees of hybrid trusts.
    Where finance will be more difficult is if the ownership of the property is in the name of X but the loan is in the name of Y - third party lending. This is happens with some unit trusts and/or hybrid where there are units issued.
    (But I have a private ruling with a solution for this.)
     
  6. Trainee

    Trainee Well-Known Member

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    Op, what do you think the differences are and where did you read this? You are asking the question as if the source is correct, and it probably isnt.
     
  7. thu555

    thu555 Well-Known Member

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    I would like to open a discretionary trust in SA due to no stamp duty & longer vesting period.
    Do I need an address in SA to open a trust in SA?
    Thanks
     
  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    What do you mean by open?
     
  9. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The answer will depend on where the trustee and the settlor reside and where the deed is executed. I have seen many people have a trust settled in a state by a solcitor only for the legal costs to far exceed the expected duty. Given all that legal advice on why a longer perpetuity period provides any benefit may also be a sound investment.

    Vesting may typically occur at anytime (read the deed) and a 80 year period or even longer in SA doesnt mean that the trust has certainty of longevity. The deed will outline who may exercise that power and how it is to be exercised. Estate planning concerning that control is probably a further issue for the legal advice.
     
  10. thu555

    thu555 Well-Known Member

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    Thanks for this information. I believe there is a trust variation to amend the vesting period longer than a typical 80 years. The main purpose I am considering is to reduce costs opening a trust. I have several trusts registered in NSW and it has been an expensive exercise, but it outweighs the benefits I get out of it.
     
  11. thu555

    thu555 Well-Known Member

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    Terry, as to form a trust. At the moment I am considering to form a completely new corporation to act as a trustee & a discretionary/unit trust. I already have 4 discretionary trusts & 1 unit trust, all registered in NSW and want options away from a NSW trust.
     
  12. Gen-Y

    Gen-Y Well-Known Member

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    Who says you don't pay stamp duty because your trust is open in SA?
    You pay stamp duty based on where your property is purchase.
     
  13. thu555

    thu555 Well-Known Member

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    Stamp duty to open the trust. Not when purchasing an asset in it.
    Stamp duty to open a trust in NSW is about $600 per trust. But when you open 5+ trusts, it becomes expensive.
     
  14. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    thu555 it is obvious you are doing this without legal advice as you are confusing a lot of different concepts.

    Trusts are not registered anywhere. They are not opened either but are settled.
    If someone signing the deed is in NSW then duty will apply based on NSW law

    Having an address is SA doesn't make a trust a SA trust. A trust formed in NSW could nominate SA law applies and you could call it a SA trust. But that doesn't mean it can vest after 80 years.
     
  15. coins

    coins Well-Known Member

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    What about if the person from out of state goes for a holiday to SA and signs the deed in SA at a SA lawyer's office?
     
  16. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    What are you asking about? Stamp duty?
    If the deed is signed in nsw duty applies here.
     
  17. qak

    qak Well-Known Member

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    Wouldn't the trip & accommodation cost more than the $500 duty?
    And if the question ever arises from your local duties office, you will have to produce your records & evidence as to the fact you did it that way, and *why* - to avoid duty?

    Potentially could cost far more that $500, if you get stuck with a closed border too.
     
  18. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Also you might have a problem in future proving to banks that the deed should not require stamping in NSW if the trustee applies for finance and there is a nsw address.
     

The shift to the regions has been quite profound with Millennials and Gen X leading the way. It seems affordability, lifestyle, and working from home have been the key drivers from which these generations have been able to take most advantage.