Property Ownership Structure - Trusts???

Hey guys,

I’ve got a question about about structuring the ownership of your investments as a developer or investor and would like to know how some of the seasoned veterans are structuring their assets.

I’ve been told to never buy in your personal name and always set up a company and a trust that owns each asset individually. The apparent idea behind this is to create a wall between each asset to protect against potential litigation. For example, if you ever have an insurance claim against you ie. A fire on your property burns down your house and your neighbours, lets say your insurance wouldn’t cover for whatever reason, then a law suit can only tackle the investment within that trust and company rather than your whole portfolio.

Does anyone use this structure, if not, what structure do you use or would you recommend for property development and buying and holding investment properties?

Thanks

 

Be critical of the ideas you hear.

It entirely depends on the circumstances. In some instances trusts can be great, in other they can be a bad idea.

Seek specific legal advice from a qualified lawyer.

 

There are plenty of benefits but there are drawbacks as well, I hold 2 properties in a trust atm.

- Asset protection like you already mentioned (but only if setup correctly)
- Income can be distributed at discretion (in a discretionary trust) to lower income individuals
- Significant trust income can be taxed at 30% (lookup bucket company)
- Land tax is calculated per entity and the rates are not linear, so if you hold multiple properties in one entity (whether personal name or trust) you pay a significant amount of land tax rather then if you hold multiple properties in multiple entities. (Look up land tax rates for discretionary and fixed unit trusts)
- Trusts cost money to setup and to manage
- No negative gearing
- Can get tricky if not setup correctly, hint the director is not the most powerful position in a trust

These are just my own observing's but I am no professional so please do see specific legal advice

 

Land tax varies from state to state too.

 

Yes, a lot to learn with trusts. I have property in a trust but haven’t split each property up with it’s own trust.
Wondering if it’s best to do this