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Personal Name or Trust

Discussion in 'Legal Issues' started by Monica, 8th May, 2016.

  1. Monica

    Monica Member

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    Hi, my husband and I are looking at buying our 2nd investment property and need to decide whether we should put it in our personal name/s or in a trust. We think this 2nd property is close to being neutrally geared.
    The first property being in my husband's name. We would like to build a portfolio of approximately 10 properties. My husband is the higher money earner and we don't expect this to change, I am currently not working.
    Based on the above info, I would appreciate feedback on the option of being in hubby's name; advantages / disadvantages. Placing in a trust; advantages / disadvantages.
    Thanking in advance :)
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    What state will the property be in?
    Have you fully paid off your PPOR?

    If you want to know more about trusts I have written many posts in the legal section.
     
  3. Monica

    Monica Member

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    Hi Terry, the property is in Qld and we refinanced the PPoR using a line of credit to leverage the equity. The property is worth approx $700K with about $200K owing on it.
    I'll have a look at your posts but we need to make a decision by tomorrow AM.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Then a trust is worth considering.
     
  5. Greyghost

    Greyghost Well-Known Member

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    Buy the second one in your name.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    This is seriously worth considering as well.

    But these sorts of questions should be asked well in advance because this is very serious thing to consider and getting it in the wrong name will have consequences for the next 40+ years potentially.

    Incidently I had a call on Saturday from a 'friend' who was at auction. 2 of them had the winning bid of a $3mil property and they wanted to know what name to put on the contract - which they had to sign within a few minutes. I refused to answer because by doing so I would have been negligent. I gave them a few tips and left it up to them. They took legal advice, which was incorrect, from the agent and signed in one personal name.
     
  7. Monica

    Monica Member

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    Thank you Terry.
     
  8. Greyghost

    Greyghost Well-Known Member

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    Of course. Didn't mean to be flippant in my response.. Best of luck!
     
    Terry_w likes this.
  9. Monica

    Monica Member

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    Thanks for the feedback.

    I guess we are battling with the benefits of claiming initial setup costs in the first year (negative gearing) vs forgoing goes in my name for longer term tax savings by putting in my name.

    Eg. If the property is ~330k and rented for ~$400pw initially. Year 1 we have approx 20-25k renos. It will be negative big time in year 1, then become neutral or positive by say year 4-5 wouldn't the longer term benefits of putting in the lower income be better?

    Based on 330k purchase and say in 5 years it's renting for $430 do you think it would be positive or are we underestimating the amount of things you can claim/offset for negative gearing benefits?
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    reno costs are generally not deductible against income in one hit but depreciated.

    You have to do the numbers and then consider the short term and long term.