Why use a trust to invest in property?

In the past, trusts were the investment vehicle of the rich, however in recent times, many Australians from all walks of life have begun using trusts to hold their assets.

So why do people invest using a trust?

• Tax benefits: you be able to reduce your tax bill by distributing income to family members with lower taxable income.  We recommend that you seek financial advice from your accountant to find out what benefits you may receive.
• Asset protection: trusts allow you to control & receive income from assets without having them in your name.  This may protect these assets in the event that you are sued or go through a divorce. Specialist asset protection lawyers can assist you in structuring your assets correctly to prevent losses.
• Estate planning: some trusts may allow you to effectively pass assets on to future generations without paying excessive taxes or going through estate disputes.

Types of trusts

There are many variations on a standard trust and many people have their own private and unique arrangements. However, the most common types of trusts that we deal with are:

• Discretionary trusts: the trustee determines which beneficiaries receive the trust funds and how much they receive.
• Unit trust: the trustee divides the trust funds between unit holders, according to the number of units that they have.
• Hybrid trust: this is a mix between a discretionary trust and a unit trust. The beneficiaries still hold units, but the trustee has discretion to distribute funds to any unit holder that they nominate.
• Family trust: this is similar to a discretionary trust, but the beneficiaries are related.
• Self Managed Super Fund (SMSF): this is a trust that is established by people who want to manage their own superannuation.

How do you set up a trust?

You can set up almost any standard trust (discretionary trust, family trust, unit trust) online but you are better off getting it set up correctly.

You may be able to set up a hybrid trust or SMSF trust online, however many people prefer to use an Insolvency Advisory Accountants so that we can do it properly the first time.

Once the trust deed has been created and signed, the settler places a nominal sum (usually $10) in the trust.

The deed can then be sent to the state government for stamping except for QLD where there is no stamping requirement. The trust then becomes fully operational once it is settle by the settler who pays the nominal sum (usually $10.00).

How can a trust own assets for someone else?

Assets are held “in trust” for beneficiaries who receive income and other benefits from these assets, without actually owning them.

The trustee is the one who manages the trust for the beneficiaries. 

For example, if you buy a property in a trust then the title deeds may show, “ABC Pty Ltd As Trustee For The Smith Family Trust”.

In some states such as Queensland, only the name of the trustee is shown on title e.g. “ABC Pty Ltd”.

Do you want to obtain finance for your trust? Speak to us now or enquire online today and we can help you no matter your circumstances.