Most suitable vehicle for intergenerational investing

I hope this is the right section for such a post. Figured it could fall under estate planning.

Thoughts on the most suitable vehicle for holding investments which will hopefully be held for ongoing future generations with no for seen plan to sell down.

At this point I would have thought a discretionary family trust with a corporate trustee and a associated bucket company included as a beneficiary would be it. Provides a level of asset protection, allows for income to be distributed across multiple family members and a company for maximum tax benefit, gets the capital gains discount benefit for assets held longer than 12 months and allows passing over control in the future via the corporate trustee.

The one downside that has come to my attention, which I feel is fairly significant is the perpetuity period of the trust. Come 80 years after the trust was established it must vest. That could be problematic. There will come a time in which all assets will need to be sold and distributed. This will lead to serious capital gain events on the assumption that over the 80 years the trust has continued to grow and has achieved significant gains.

Is there a way around this?

Doing some research it appears that trusts established in South Australia do not need to have a perpetuity period. Is there a downside to having a trust that is able to go on as long as desired?
If the South Australia option is the only way around avoiding having a trust that expires is there any issue with a NSW resident establishing a trust in South Australia and using that as an ongoing investment vehicle?

Are there other more suitable options / Vehicles? I know just having a simple company to invest in is an option, but then you loose the capital gains discount benefit as a company.
Also thinking if the plan is to never sell down then is capital gains tax an issue? Yes and no.
The plan is to mostly invest in equities but also hold unlisted property trusts. Unlisted property trusts tend to sell down assets and pay out capital gains. Need to also consider that well into the future the asset mix might change and the need or want to sell down assets might come into play. So cant cancel out the benefit of the capital gains discount.

Any thoughts or opinions on suitable options are much appreciated.

 

Company with shares owned by an individual. On death shares passed to a testamentary trust. Can last forever under current rules

 

Not advice, but structures can change. Also consider how to separate assets if you have multiple beneficiaries. And testamentary trusts, but that generally only works for assets in your name.

 

terry do you mean the trust can last forever in that case? As opposed if the investments just went to the tt?

 

79 years after establishment of a testamentary trust the trustee can pass the shares to the oldest family member who then dies and leaves them to a new test. This can be done without triggering cgt

 

Would the same theory hold then for just listed asx shares in a tt?

Eg grandpa dies splitting asx shares into two tts for two children.

another 80 years, tt gives asx shares to grandkids with no cgt, grandkids die and shares go to more tts for the great great grandkids.

 

Yes

 

Thank you for the feedback.

There will be multiple beneficiaries but my wish is that they not separate the assets and continue to hold and build together. I get that in the future that might not be what the kids want and might want to go separate ways. But that's not what I want for them, so will plan on the basis they keep it all together.

So if I understand this right. You hold the investments in a company. Shares are in said company are owned by me. On passing I state in my will I wish for my shares to be placed in a testamentary trust. Would that not mean that the investments would remain in the company and only the ownership of the shares of said company go into the testamentary trust?

That would still have to deal with the issue of assets being held in a company not getting the capital gain discount benefit, would it not? Do the assets held in the company get moved into the testamentary trust upon death or just the shares of the said company?

 

A 2017 SS V Redline would be a vehicle that would hold value for future generations.

 

If its say a big property then holding together might make sense.

if say listed shares, not so much.

for me, each beneficiary will have his or her own tt separate from each other.

If they wanted to invest together they can always form other structures in the future. It wont be just children, but another 2 or 3 generations. Having seen how families can fight amongst themselves, not something i want to create.

 

You make a good point. Maybe I am being naïve in thinking I can force my kids to get stick together and continue to build wealth as one big family unit well past my existence. One can only hope.

 

Personal opinion only. If they want to invest together as a unit, they can form their own partnerships even if they have their separate assets. But I won't be forcing them to do it.

What is the general opinion when posters suggest buying with family? Negative.
What's the benefit of investing together in listed shares or similar investments where you don't have control? None.
There might be benefit in investing in a business together, or buy a big property or something, but that can be done in partnership and only commit part of their assets.

If there are multiple beneficiaries, or by the third generation...... some people overseas, differences in opinion, have seen wealth squandered by older family members and younger family members getting nothing.

 

I think Big A's question was which was the best structure for inter generational investing. This must be the company because they can last forever with no perpetuity issues.

But if the question is what is the best for that plus being able to meet estate planning needs then perhaps one company per child might be better.

As for companies not being good for CGT - not necessarily. They can be good because company tax is not the final tax. Once the shares are held by the trustee of a testamentary discretionary trust minor children can earn around $20k pa each, getting back franking credits and making that portion of the CGT completely tax free.

 

Can the holding company with shares owned by the trustee of the tt be set up after death? And listed shares owned directly by the deceased transferred to the holding company?

Think i’m not understanding the difference between tt directly holding cba shares for example and holding it through a holding company.

can the tt owned cba shares be transferred to a beneficiary without triggering cgt, then the beneficiary dies and the shares go into a new tt?

 

yes. anything personally owned can be left to the trustee of a TDT.

This could apply to shares too:
Tax Tip 194: Transferring a Property from a Testamentary Trust to a Beneficiary Without CGT

 

Good point. Not sure of the odds of such an arrangement coming into play though. It would require death and assets being moved into testamentary trust and having minors to distribute to at the same time. Probably wont be useful in my time. Could be beneficial for next gen once assets are held in testamentary trust and they have minors to distribute to.

I am starting to think it might be best to just keep accumulating under current discretionary trust and at some point in the future set up new trusts, possibly one for each child and from there commence accumulation in these new trusts with the 80 year period re commencing. Accumulate for 20 years then every 20 years you set up new trusts for the next gen and slowly commence transfer to new trusts.

 

it can also work out even if there is never any minors.
Discretionary trusts can be a good way to hold shares, but the biggest draw back is the shares cannot end up in a testamentary discretionary trust - which is even a better way to hold shares.
But shares can be easily moved without stamp duty, but CGT will be triggered.

 

Should one be less concerned about triggering CGT and more concerned about triggering Testamentary Discretionary Trust?.

 

But hard not to contemplate death when doing estate planning?

 

The other strategy is to use a trust with bucket company with shares of this personally held. This way you get a bit of both tax flexibility while alive and after the bucket holders desth