Structure for someone starting out

Thank you Jess. That's definitely one aspect I hadn't considered.

 

Thanks Terry - I know that the family court can do what they like in this regard (in order to try and achieve what they see as a fair outcome) and transactions and structures setup specifically with the intention of not paying creditors. Is this what you mean? Or further from these sorts of situations?

 

That's a good idea Scott. I think it's always tough because you talk to a lawyer who's job it is to identify and minimise risks - but it can be hard to quantify how real / likely that risk is. I think hearing the odd horror story (someone losing everything) scares people into not being the next one.

So for me part of it is about protection (for admittedly what would most likely be a freak occurrence) and part is about avoiding unnecessary costs and taxes at a later stage if they can be dealt with now. As you indicate - low value assets, it probably not something I need to be concerned with at this point.

 

what state, land value, land tax rate and exemptions are you basing this on?

you get sued by the tenant, thats why you have insurance. You going to put each 300k property in its own trust?

 

Thanks Curious - this fits with my thinking prior to seeing / hearing people say it was a no-brainer or equivalent.

 

Thanks Shahin, it's good advice. Fortunately I don't have any loans / debts to worry about so this is more straight forward for me than for some.

The gearing aspect is more of a hypothetical to get a sense of whether people in the community here would think a trust structure makes sense if positively geared - seemingly that is not the case.

 

Thanks Albanga, a property investor I was having a chat to said it but I think I read the equivalent on here somewhere.

I understand that these kinds of comments can be right and wrong at the same time depending on the individual circumstances - hence my questions about whether this really fits for me as it's not what I would have thought previously.

Thank you for making it clear!

Will take comments re factoring in all costs on board.

 

Thanks Terry (again)

I understand this in the context of a couple - it might be more advantageous to have in the name of the person on a lower income. Is this what you are meaning or beyond that?

 

In NSW the extra land tax on a $300,000 land value would be $4,900 per year. In VIC the difference wouldn't be as great, but would be about$838 per year ($375 for individual v $1213 for trusts)

 

What a crazy world we live in! Thanks Y-man, I will have a look for your writings on passive income.

 

Thank you Skater. Very helpful and in line with the others above

 

Not really. I see some with trusts set up that are not transacted properly. The individual pays the deposit, and often the loan payments, and the person thinks by writing 'as trustee for' on the contract of sale that this offers some protection - it does, but a wet paper bag level.

Also some terms of trusts weaken asset protection - default beneficiaries, closed classes etc

 

You should read up about 'resulting trusts' and 'constructive trusts'. Structuring a purchase in your own name but with the ability to argue that you are not really the beneficial owners is a good strategy - perhaps - which can be used if and when needed.

Also look at the 'gift and borrow back' strategy

See my legal tips

 

I'm in Victoria. Having had another look I think it would be $840 ish more to be held in a trust (if the property value is $300k).

Fair point re insurance.

Yes - in terms of my hypothetical strategy it would involve a separate trust for each property.