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Newsletter Jan05 - Trust Splitting as an Assett Protection Strategy |
One asset in a family trust that goes bad will take out all the other assets in the Family Trust.
For asset protection purposes, assets are divided in 3 classes:
High Risk (e.g. a trading business).
Medium Risk (all types of real estate – if someone is injured on the property then the Trustee is often personally liable, even though the Trustee may have no beneficial interest in the real estate).
Low Risk (Shares and Managed Funds).
Only a madman would keep high-risk assets (a business) with low risk assets (shares) in the same family trust. You can have as many family trusts as you
want. However, you do suffer greater accounting fees each year. You don’t want to have too much wealth in a family trust, as the more wealth in the trust, the better the target for would be creditors.
Trust Splitting
The solution we have come up with for splitting a trust is great. It has no CGT and stamp duty implications, and on the 3 occasions we have split a trust, there has been the following benefits:
asset protection: A client wanted to separate his valuable business premises from his other business assets that were all sitting in the same trust.
land tax minimisation: A client had 2 properties in their family trust; because of aggregation rules for land tax (ie. sliding scale tax rates), the land tax bill was $12,000. By splitting the trust so that there were 2 properties in 2 trusts, the land tax reduced to $4,400. We confirmed this with Land Tax before the process and the reassessment went through afterwards with no problem. Be warned– there is a land tax anti-avoidance rule, so don't do it or admit it was done just to avoid land tax.
estate planning: Our most recent client had a few properties in the same trust, but when doing his Will, he wanted to have different levels of control by different children for each property. The way we solved the problem was splitting the trust so that different properties were in different sub-trusts controlled by each kid
Rosendorff Lawyers has a successful history in trust splitting. To start the ball rolling please call Alan Rosendorff on 9011 8353
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