Many people have started using family trusts to set up the ownership structures for their investment properties. This gives them the ability to protect their assets and reduce their tax bills.
Whether this will work for you depends on several factors. Your income, combined with that of the trust’s other beneficiaries, plays a part. So too do the assets you place in the trust.
You’ll also need to consider the costs of managing the trust before you try to use it to secure any
. A trustee will manage the assets the trust holds on behalf of the trust’s beneficiaries. They’re simpler than most other trust structures, which has led to many investors using them to secure home loans.
No individual owns the assets in a family trust. Instead, they’re owned by the trust itself, with the trustee managing the distribution of any income the trust generates. This is done upon the conclusion of each financial year. Furthermore, the trustee can help the beneficiaries with any tax benefits the trust may provide.
The trust can borrow and invest in a similar way to an individual. However, all assets that require trust funds must be held in the trust.
You must complete four steps before you can set up a family trust:
Family trusts offer three key benefits to their beneficiaries. These are:
While a family trust can help you save money on your tax bill, there are some other issues to keep in mind.
For one, you will not share losses in the trust. This means you need to create a proper structure for any home loans you take out using the trust, so you receive the appropriate tax benefits.
Moreover, the majority of
ask all trust beneficiaries over the age of 18 to act as guarantors on any home loans taken out using the trust.
This means you need to consider the circumstances of the trust’s beneficiaries, as well as your own. Speak to a professional to find out if a family trust is suitable for your situation.
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