Trusts: what wording on documents

I'm in WA and bought a property using a discretionary family trust with myself as trustee and whole family as beneficiaries.

I understand property had to be registered in the name of a legal entity, i.e. the trustee, the trust itself is not a separate legal entity, so accountant stressed the importance of writing on the Offer & Acceptance document: "Daniel Smith as trustee for Smith Family Trust" to avoid possible WA stamp duty implications when changing it later.

Now I'm wondering if correct wording is required on any other docs, specifically:

• Lease Agreement: I have just put down "Daniel Smith" as lessor. Does this matter? Do I need to change it? And if so, to what? Just "Smith Family Trust" or "Daniel Smith atf Smith Family Trust" or no change, just keep as "Daniel Smith"?
• On bond lodgement form: Bonds Management System :: Lodgement Form - fine if I just put down my name or do I need to enter trust name.

Anywhere I need to be aware of using correct words or not important?

 

That is probably not a good idea.

I wouldn't be taking legal advice from an accountant.

What does your solicitor say?

Avoid taking advice from a non-solicitor as they are are not able to give advice on stamp duty and their insurance would not cover them.

 

I undersand this arrangement doesn't offer asset protection. My reason for the trust was tax minimisation rather than asset protection.

I don't have a solicitor.

 

yet the trustee is buying property?

 

Who is the named beneficiary?

if you dont have a solicitor, who advised you to use this?

 

Yes? What I tried to achieve with the trust is to allow splitting of income between my wife and I favourably according to margin tax rates. Would my arrangement not allow that? Would using a corporate trustee be any different in this regards? In WA, trusts themselves cannot go onto certificate of title, see under "1 General": POA-05 Declarations of Trust (Section 55 of the TLA) - Landgate so common practice is to use "Trustee atf Trust name" on O&A docs.

• Myself
• My wife

Other classes of unnamed eligible beneficiaries include children and any extended family members.

No one advised me to use a trust. I simply chose to use a trust to split the income to reduce tax bill since my wife is on much lower marginal rate. I did however consult with tax accountant to confirm this plan and for them to draw up trust document and act as settlor for the trust.

 

I can't advise as I don't know what you have done nor seen any docs. If it is a discretionary trust the trustee could potentially distribute income between any of the beneficiaries and whether individual or company as trustee would not change this.

The general reason for not using an individual as trustee in this situation is asset protection against tenant litigation, which is a low risk, and improving borrowing capacity.

Trusts cannot be recorded on title in any state as they are just relationships.

Who set the trust up if there is no lawyer?

 

Tax accountant, but I think he in turn used Discretionary (Family) Trust solutions because there's a reference to Maddocks Lawyers on the cover sheet.


So returning to original question: for tax purposes, do I need to go back and change my lease agreement obtained from Rent agreement (form 1AA) so that Lessor says: "Daniel Smith ATF Smith Family Trust" instead of just "Daniel Smith" ?

 

I don't see the point in doing this. Why didn't you just bypass the accountant?

you don't need to but the question should be 'should I'?

 

In retrospect, yes, I could have done so.

As long as I can still split the rental income I'm happy. Of course I don't provide the lease agreement to the ATO when I lodge my tax return, but wasn't sure if they could request the lease agreement if they did an audit and wheher they would object to the rental income being processed through the trust if the lease agreement didn't state the trust's name.

 

I think your accountant has done a good job.

the primary document to prove ownership is the offer and acceptance. The other documents should mention the name of the trust - it is not a deal breaker but recommended.

I assume you have chosen to go a personal trustee to save on cost. And that is fine if you understand the implications.

 

Not necessarily. If a tenant sues they will sue you personally in either case. You, as a trustee, may have a right of indemnification from trust property. It wont matter if the tenant knows or doesnt know about the trust relationship. This is why its not wise to have a human trustee. If you like being sued personally you have made the correct choice to not get legal advice on why a corporate trustee is a wise choice. You also remain personally liable for all tax issues.