I've just signed a contract to purchase my first IP with development potential. At this stage I'm looking to hold until the next cycle before developing and will hold some sell some. Property is slightly negatively geared. The problem is I've signed it in my personal name instead of some sort of trust. Given I'm planning on developing the asset protection would be nice. Obviously will need to work out cost and benefits. 1) Is it too late to change the purchase name to a trust one before finance starts? I can ask the broker to delay the finance application by a few days to set up a trust. 2) If it's too late to change the name and it will incur transfer costs, would it be better to set up any future assets in a trust to isolate this asset to my name only?
Signing in the name of a trust before its deed is executed can result in ad valorem duty applying, so you would want to get the trust in existence first. Options are likely 1) Cool off contract and enter into a new contract with trust 2) Deed of nomination if contract allows for it and no double stamp duty applies
1. no 2. seek legal advice. This is a very complex question. It sounds like the trust doesn't yet exist. There are also asset protection issues as you have entered the contract and not the trustee. Asset protection now in relation to this transaction and ongoing. See Legal Tip 39: And/or Nominee contracts and Asset protection https://propertychat.com.au/community/threads/legal-tip-39-and-or-nominee-contracts-and-asset-protection.2032/ Best way to proceed may be to terminate the contract and then have the trustee to enter a new one. Deed of nomination may result in duty being payable twice. And depending on the state transfer by direction may be better.
Thanks all. Property is in Vic. I'll seek tax and legal advice tomorrow. However a quick google says that a trust may take 2 to 3 weeks to set up? I can't see the vendor waiting that long when there was another offer.
a trust can take from 10min to 10 weeks to set up. You need to allow a few days at least because the trustee has to be set up before the trust and you need time to review the trust deed and ask for amendments etc.
If there is another comparable offer then you are taking a risk by cancelling the first contract unless you have a legal guarantee (?) that the vendor will sign the alternative contract. Marg
Yep. I've asked the agent what the closest offer was and he indicated the difference was around $2-3k. The place is a real gem, I think there's a real risk the vendor will jump ship. Makes it much harder to decide. May end up going through with it in my name, then sell with plans next cycle.
In most cases it shouldnt be a problem. Justpresent a new contract in new name with a new deposit and then pull out existing one. Check with a lawyer first. Don't leave the deposit there because if asset protection risk. The purchaser should pay the deposit.
How does this work if the deposit for the original contract and new one are both coming from the same bank account? Is it just a case of a different reference on the deposit transfer?
They shouldn't be coming from the same bank account. If you paid a deposit on a property that I was buying this would muddy the waters - do you have an interest in the property? Read my legal tip on resulting trusts. It weakens asset protection.
Most duties acts (all?) have a clause that renders double duty if a contract is cancelled in contemplation of entering into another agreement
A badly setup trust may never be a trust too. ie no trust assets ? Have seen plenty do that thinking that a cleardocs email = a trust. Signed, no. No trust assets ? Hmmm. Maybe no trust. The OP talked of asset protection for a dev site. This might not be as protected as most think. One key failing can be if profits are produced. Then a beneficiary becomes entitled....That profit is now not protected even if the $ are retained in the trust. Also asset protection from what...? A spouse ? A business creditor who wants the $ that led to the trust being established ?
If acquiring a property in a trust, I believe all you do is put the trustee's name in the contract of sale, no mention of the trust. Therefore if you are personal trustees of the trust, then nothing would need to be amended in the contract. But you would need the trust setup before you enter into the contract of sale for the property.
