Legal Tip 395: Structuring When you are Not Structuring

If you own assets you will have an ‘ownership structure’ whether you realise it or not. You will also have ‘structured funding’ whether you pay cash, inherit or borrow to buy it, or even if you are gifted the asset.

Every ownership structure requires active decision making on ‘structure’. When an individual buys a property they are structuring ownership even when they buy it in their own name. They are making a decision to not own it as trustee, to not use a company, or to not jointly own it.

When 2 spouses buy a property and ‘don’t want to structure’ they are still making structuring decisions because they have several choices – joint or single names. If joint which of the 2 ownership structures, which are joint tenancy or tenants in common. If single names, which name, A or B?

Similar when funding.

If you had $1mil cash and were going to acquire a $1mil property in some ownership ‘structure’ you would have to decide on several options. Even paying cash for it is an active decision which has future consequences in terms of asset protection, estate planning, tax, finance and more. The alternative might be to borrow 100% and fully offset the loan or do this and then immediately debt recycle the loan, or you might use a 20% deposit and borrow the rest or you might use a related party loan or a combo of any of the above.

So, when you are not structuring you are still structuring as you are making decisions – which you might not even be aware you are doing.