Asset protection and Tax optimisation

Should I use a Unit Trust, Family Trust, a Hybrid Trust or maybe not a Trust at all?

There is no one correct answer to this question. If there's no correct answer, why bother mentioning it? Unfortunately, we see many investors who take the advice of friends, colleagues and family members instead of seeking professional advice. We've seen many disaster stories where this has happened and thousands of $$$ lost through poor set up.

Each investment scenario and client situation will require a different investment vehicle to maximise asset protection and optimise your tax situation. You need to obtain advice particular to your circumstances. Here are some popular concepts you may encounter:

A Property Trust (Unit Trust) is a trust that has fixed income distribution dictated by the ownership of the Property Trusts Units. For example if there are 100 units in the trust and you have purchased 10 units, then you will receive 10% income from the trust.

A Family Trust is a discretionary trust which allows income to be distributed to any beneficiary of the Family Trust according to the discretion of the Trustee and the rules of the Trust. One of the most significant benefits of this structure is that the income can be changed each year going to the person/s with the lowest taxable income in that year. One of the downsides is that a Trust cannot distribute losses to individuals. Losses can only be used by the entity itself.

A Hybrid Trust is a Trust that has fixed capital units (ownership shares) and discretionary Income capability. These are becoming more popular as investment vehicles due the defined ownership of the capital invested and the ability to distribute income in a more flexible manner than with traditional Property Unit Trusts.

Some people do not use trusts as a property investment vehicle. If you would like to review your asset protection and tax planning situation we can refer you to one of our Strategic partners on our expert panel.

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