Discretionary Trust - Company - IP Strategy

Hi guys,

I will be looking to engage with a lawyer in the close future to discuss setting up a discretionary trust with company, which will house all future IP's in my portfolio. I will be looking to have upwards of 7 IP's, live off my PAYG and pass on the income to family members. The trust will expire when I die.
This will also help to minimise tax as the portfolio grows.

I'm correlating information to ensure I understand the in's and out but I would like to hear lessons people have leant or things that are often over looked.

Cheers

Kieren

 

#notanaccountant but if the IPs are going to be in WA there can be significant upside to having multiple trusts instead of just 1 in terms of landtax.

 

and then what? You are in your 20s. Assuming you have or will have kids, and they will have kids, you want to put more thought into this.

are you on the top marginal tax rate? Why a trust? How much total assets are you talking about for 7+ ips? 7x200k is very different from 7x 1m each. And by the time you die they will probably grow significantly.

Read a lot more and pay for a lot more good advice before doing this.

 

read my tips in the legal and tax sections - and the finance too.

Land tax is the biggest thing to consider and best not to use one trust to hold properties in different states.

 

And trusts pose a issue for net tax losses. The all in trust approach tends to work for cash investors where net income is positive for at least some of the property. In time that swings so the positive income becomes a expanding problem. And so too does land tax as values rise. Only one state indexes thresholds and it isnt friendly to trusts. But be wary of land tax. 7 properties in any entity could be a cashflow killer. However diversification across states may limit the impact.

 

Get somebody to cashflow model the tax benefits of a trust before you start. Often the strategy generates no immediate benefits - you can start off small and simple with structures and do stuff later on as you start to accumulate more.

Breaks my heart to see people with massive complex structures they generates no real benefit. It only benefits the advisors.

 

Ditto.

This is sage advice. You need to look at what the potential income vs other benefits. It can be quite costly. Not many people look at it like how you have suggested...many on here have got into the poo doing stuff without properly thinking it through.

I believe it in keeping in Keeping it Simple Stupid (KISS).