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gifting to Disc trust regularly

Discussion in 'Legal Issues' started by KJB, 16th Sep, 2016.

  1. KJB

    KJB Active Member

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    hi everyone,

    Have been reading Pete wargents books and am very interested in adopting his strategy of buying regulary in index funds (after a lot more research on the matter)

    I would be looking to do this with approx 10% of my pay each fortnight.

    could I create a family trust (with a corp trustee) and just gift this amount each time and buy these through the trust?

    ideally this wouldn't be accessed for 15-20 years and by that stage I was hoping to distribute the dividends' to me and my partner.

    is this possible? If so any advice?

    thanks

    KJB
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    Usually better off lending it to trust than gifting, but seek advice.

    Benefit of lending over gifting is that one day in the future the trust can pay you back
     
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  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes this is possible. You would want to make sure you properly document the gift.
     
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  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Depends

    Greater protection against creditors if you gift it. You can borrow it back if needed or make a capital distribution.
     
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  5. KJB

    KJB Active Member

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    Thanks @D.T.

    will be approaching @Terry_w in the near future get independent advice.

    One thing I'm a bit lost with is that if I lend to a trust don't I have to start paying myself back plus interest or interest only straight away (in repayments set out in a loan agreement?) and if this is the case wouldn't I be better off at least for a few years to gift monies so I have enough invested to earn enough dividends to pay myself back plus having some left over to be reinvested and help it compound?

    or

    would it be better to loan a sum large enough to cover interest leaving funds to reinvest and help compounding and then to revert to smaller frequent amounts?

    again will be seeking advice, some info in the meantime would be great :)

    Cheers KJB
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If you loan you could do it interest free. But you have to worry about the limitations act as the loan could become unenforceable after x years - 6 or 1 usually.
     
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  7. Millie

    Millie Member

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    Could you please explain this further for me? Direct me to the relevant Act/clause?
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    From memory s14 and 54 limitations act NSW.

    Thst should have been 6 or 12 years. Depending on whether agreement was by contract or deed
     
  9. Millie

    Millie Member

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    Thanks - what if there was no written agreement at all?
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It would be a contract - oral contract so 6 years after the date of last transaction it would be unenforceable. You can refresh this by putting the agreement in writing.
     
  11. Millie

    Millie Member

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    What is the last transaction? Into the Trust, or out of the Trust or either?
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If it was a loan then the date of lending. If there was a repayment then the 6 years starts again.
     
  13. Millie

    Millie Member

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    Thanks for your help.
     
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  14. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    If the trust produces income which is reinvested then that becomes an unpaid present entitlement. There may be no asset protection on that v's the capital gifted as corpus into the trust. eg Mrs Millie could demand Mr Millie or Millie Pty Ltd payout the unpaid accrued income which accumulated year on year. And I reckon most lawyers would have a crack at the trustee and argue a sham regifting was coercive and intended to defeat a claim even if the beneficiary releases the unpaid entitlement annual as a extra gifting amount. Puts the whole subject of gifting at risk in the family court ?