Best Structure for Investment Property

1. Most people don't need that level of asset protection. If you're worried about this, assess the risk of something happening, the consequences and will having your IPs in a trust really make a difference to your financial outcome?

2. In most cases the tax flexibility only applies when the property is heavily positively geared. It's often questionable if this long term benefit is worth the shot term loss of offsetting gearing losses against your personal income, or the extra ongoing costs involved in using a trust.

 

If you think what it cost for setting up a trust $$$ divided it by 80 years = year cost.
That is a protection I would pay every day no drama.

 

The setup costs are negligible but what about the ongoing costs. Extra council rates in some areas, higher land tax, extra tax returns. This can be thousands of dollars a year per property, which might be better spent on various insurances.

I'm not saying there isn't value in trusts for some people. I invest through trusts and it's working reasonably well but my circumstances are different from 90% of others. I just don't subscribe to the idea that the wealth use trusts, therefore everyone should.

 

I think people should get specific legal advice before deciding whether to set up a trust or not to.

 

I have taken into consideration of the cost involve before going down this path.
It is a cost of doing business - have on call the best advice is critical to making a sound decision.

 

I spoke to a client today and referred them to a solicitor since it does involve legal advice. However their concern was a issue with a past spouse. They wanted to safeguard a risk of losing wealth from property in that way. I explained that the family court dont care about structures and trusts. They can do as they please.

 

A better way to look at it to take all the issues and costs and multiply by 20 years or more.
eg
- Higher land tax due to threshold / rates / surcharge
- Loss of neg gearing
- Higher finance rate ?
- Annual tax and financial reporting costs
- Trust establishment costs
- Trustee annual asic fee
and balance this up v's savings from income splitting, land tax threshold (ie QLD) and so on.

Sometimes just one issue eg land tax in NSW is sufficient to make a trust less viable. Another issue : In QLD I would be very cautious about using a unit trust for example due to risks of stamp duty.

Is there any asset protection and how effective may it be ? Thats something that is seemingly simple but a quite complex issue of law.

 

This is not true and would actually be legal advice.

 

It is my trigger to do exactly that and obtain appropriate advice. All of their circumstance is important. I just point the direction to a solicitor and that is the best advice I can give as their assumption was invalid and not based on legal advice but a perception. I cant help with legal, medical, dental, mechanical and engineering (and other) issues. If someone is seemingly insolvent same applies. Its a legal issue.

Mike A has just referred me to a great lawyer / firm for all those curly property tax issues like duties, FIRB etc.