I'm struggling to find a suitable answer to this question as it pertains to my own situation. I understand that a business, or some professionals may need a trust to protect their assets. But what about a typical, blue collar working family, with three kids who is just starting to get into property investing? Why can't you just write a will when you're about to cark it? I also talked to my broker, and I have to agree with him that I don't see the value/nor the necessity of making life more complicated - nor the logic in paying the additional expenses to structure/maintain it.
Not sure why you would talk to a broker about trusts? No one needs a trust. A trust may be beneficial to the family over the long run, but it depends on what the trust will hold and how it is set up. Wills are a separate issue. You can write a will just as you are about to die - but it may not be valid if you are not of the right mind? So best to write one now as you never know when you will kark it! you can incorporate a trust into your will too. See my legal tip about testamenary trusts
What about a blue collar worker today that buys property in his own name and then some years later ends up starting a business that has potential for being sued? What if you die suddenly without the benefit of having the time? .....car crash? heart attack? victim of a random shooting etc Most of the time he's probably right but most people that buy house insurance, don't have their house burn down either......but they still pay the insurance premium every year.
He can start the business as a company, not as a sole trader. The company gets sued, instead of the individual and the company should retain professional indemnity insurance. If that's not enough, the company winds up. Sure you can be in trouble as a negligent director, but no need to get paranoid if it's going to hold you back in any way.
No need to be overly paranoid about asset protection, but you need to consider it carefully in every transaction that is done. Imagine a couple who buy 8 properties all 50/50 in each name as tenants in common. They love property so they want to start doing developments. Developments are very risky, especially for new and inexperienced developers. Whatever they do their personal assets will be exposed. Banks will insist on personal guarantees with any company structure. This can be minimised by using one of them, but still half the assets could be exposed = that's the equivalent to 4 properties. Restructuring the existing properties may be possible, but it will be very costly and the transaction will still be subject to clawback provisions. Selling them all won't solve it either as the cash will be subject to clawback. Asset protection doesn't = trust, but it needs to be considered from the first purchase.
