Thoughts on my investment Strategy

but the shareholder will only last 80 years.

 

By then it will be someone else's propblem.
They will do what they want with it any way. Including selling it all to by drugs or play the pokies.

It can be 50% personally owned, 50% trust or many trusts.
So at least 50% can be "willed" and spread out.
Many choices and variations. It's the concept .

 

@Big A courtesy of @Nodrog seems to some up your and my journey!

 

The same argument could be made for the trustee of a trust directly owning the asset.

If an individual owns an asset it can be passed on death without triggering tax so that might be better too.

 

You make a good point. So even the holding investments in the company will face an issue with the shareholder being a trust with corporate trustee. What happens when the trust that's the shareholder ends in 80 years time? You must remove that trust as the shareholder of the company? What are the consequences of changing shareholder of a company that would own significant assets over that time period? Tax / Duties?

 

The point of this exercise is so that it doesn't become someone else's problem. Makes no sense to me to go to all the effort of building up wealth to be passed on and then not make as much effort as possible now to avoid pitfalls in the future.

 

Just did some reading on my last question regarding removing the trust as a shareholder of the company if and when required due to vesting. It looks like there is no stamp duty payable on changing a shareholder of a company in NSW since 2016. I cant imagine there would be any tax consequences for a change of shareholder either.

 

Trust would vest and shares held by the trust will pass as per trust deed, triggering CGT and duty possibly

 

Duty could apply still

 

Change of shareholder will be a disposal of shares, a CGT event

 

Ok. So duty could still apply though based on the NSW government website it appears that there should be no stamp duty applicable.

Then there is this CGT issue. Now if CGT is payable when the trust that owns the shares of the company is changed due to vesting then that sort of defeats the purpose of using the company as a holding vehicle, as it will face the same issue come 80 years time if the shareholder is a trust.
I see there are some rollover events in which CGT is exempt but will have to look further into that to see if it applies in this scenario.

This has got me considering another option. From reading your posts @Terry_w is seems the ultimate goal is to have the assets or shares of the company that holds the assets end up in a testamentary trust. This is only possible if the shares of the said company are held in an individuals name and they pass. So what if this company that we use to hold investments changes its current shareholder from the trust to myself and partner now. It currently holds no Capital gains due to only investing in interest earning assets so far. So no CGT applicable if we change the shareholder from trust to personal names. Sure that limits income distribution from the trust to just partner and I during our life time. But being that we still have the other investments in 1st family trust that can still be used to distribute to other family members / kids in the future.

Best of both worlds. Holding investments in a company now with partner and I as share holders limits distributions to only 2 people but opens up the possibility of moving a good portion of the assets into a testamentary trust in the future. Then also having a family trust allows us to continue distributing to multiple beneficiaries with the added benefit of capital gains discount. Downside is the structure will have to be wrapped up and assets moved across to a new trust every generation or so. Then again if the bucket company ownership falls into a testamentary trust in the future, the family trusts assets could be slowly sold down and distributed to the bucket company. End result would be that all assets are held in the one company which its shares will be owned by a testamentary trust and all its benefits.

This is quite the puzzle. Or am I not putting all the pieces together and this makes no sense?

 

in some situations if the company owns only NSW property less than $2mil, it might be exempt. might

 

A company can issue different classes of shares. One class could be 'dividend access' type shares to a discretionary trust - with others owned by an individual, over vice versa. You can have a discretionary element in the company and pass the non-discretionary shares on death to a TDT.

 

No property owned at all in NSW or anywhere else. Yes I am aware that if property is owned by the company then duty could be payable.

 

Thank you Terry. Appreciate the feedback. I will have to do more homework and then organize an official consult with you to look at the best possible structure and any possible future pitfalls.

 

One strategy to consider is getting elderly parents etc to own shares in the company.. or you own them as bare trustee for them

 

You're working on the assumption that you get to make that decision. You don't. None of us will.
Just as Kerry Packer did'nt as James p'd it up against the wall.
Enjoy it while you can.

With shares you can leave different amounts to whoever you want as each share as a seperate asset.
So a person can leave 50 shares to wife and ten to each kid and 2 each for all the grandkids. No inheritance tax.

A company can also issue "non voting" shares which means they don't vote and have no say in the running of the company.
And "preference" shares. They get paid first.

 

Fair call. But I get to make that decision while I am still around. Once I am gone, if they think there is a better option and tear the whole thing apart then good luck to them. Hopefully I do a good enough job with them between now and then that they will be continue on the path that delivered them that fortune to begin with.

 

Often times, after a while the next generation will have different plans, ideas, goals.
Personally I've always been of the opinion to leave with as little as possible start giving the inheritance as early as possible. Or at least pass control.
Most lottery winners blow their winnings very quickly. Most people are not good at managing lump sums.

 

Couldn't agree more. That's why the plan is for the kids to be involved in managing the wealth from an early age. That way they have an ownership and responsibility well before they have 100% control.
When people say give it away as early as possible, does that mean you cash everything out and see here a wheelbarrow full of cash. I intend to give them what ever they need and want as early as they want it. Within reason of course. That's the purpose of all this effort. I could be in a position to do it right so they have plenty now and still enough to continue on building more well into the future.