Hello.
I have been reading PT forums extensively since i found it for past 3 weeks. Great site! I'll try to keep this post as short as possible.
Background info:
I'm looking to start PI, namely acquiring one or couple rental IP's. I do not own any properties at the moment.
To the point.
I'm looking for some explanations about trusts. I have read numerous online articles and such, even at PTwiki, and still have questions regarding this matter. Almost every guide i read stated that i should seek professional advice, which is perfectly fine by me and I do intend to do it, but I want to grasp better understanding, so I can ask all the right questions. Often people warn about getting 'bad advice' from other 'people'. This is something I'm particularly afraid of and trying to get it setup the 'right way' the first time. However I have no clue how to tell good advice from bad advice and how to avoid bad one. The fact that professional advice is expensive does not necessarily mean that it's good, but how can i tell ? I'm looking for comments regarding the following:
1. Asset protection
So the main point of trust is asset protection. But i understand the safest situation is if I would be only a beneficiary, while If i'm settlor or trustee then trust is a kind of my asset and in some cases can be still 'endangered' by a legal action - assuming something catastrophically bad, which I'm not expecting or intending but such is life. Am I correct in my thinking ?
2. Gifting + ongoing gifting
say i buy a property. i have to give down payment, of say 100k. I give it to the trust. so i forget that 100k at 27k per year. But to pay if off faster i also want to make weekly contributions of say $200pw. is that 200pw also counted as gift to the trust ?
Also can i pay any expenses (rates, R+M, etc) out of my own pocket ? is it also counted then as gift to the trust ? What about improvements to the property (i spend my own money but value of trusts property goes up) ? what if i EG subdivide section owned by trust (subdivision costs + then there are 2 smaller sections)?
3. removing money from trust
haha, I'm just concerned that if giving money to the trust is so hard, taking money out of it must be harder . or is it? Say i have properties making positive cashflow. I want weekly payments to my account from the trusts account. I understand trust is taxed at 33% flat rate. Do i also have to pay personal income tax on this same money ?
If I sell the property for capital gain, say $50k, can i transfer it to myself (my own account) without any tax ?
4. managing trusts
often i come across that trust to be 'good' must be managed reguraly. what does this actually mean ? what constitutes managing the trust ? and what are the costs and obligations involved ?
5. cost to setup up trust + ongoing expenses
I called some legal company and they quoted me $3k+gst to setup a trust + $300 pa ongoing maintenance fees. I see other firm offering basically the same service (or maybe not ? i cant tell ?) for less than $1k ? is the first company trying to rip me off or they are doing somewhat different things and i'm comparing apples to oranges here ?
6. type of trusts
another topic i'm confused about. IRD mentioned 2 types - trusts and trading trusts. on the web I cam across some other names, as in family trust, property trust, parcell trust - is this all the same thing or they are actually different and where can I see the list of all available types and their particular benefits/drawbacks, etc ?
7. investment company held by trust ?
also i came across statement, that it might be beneficial to have PI company being help in a trust as a 'sole trustee', and that setup gives best asset protection and tax benefits ? anybody have any experience regarding those ?
Also.
Accounting firm i used for past couple of years are dealing mainly with businesses and their experience in property tax is rather limited Therefore
I'm looking for recommendations for some IP specialised accounting and legal advice in Auckland area.
Your feedback is greatly appreciated.
Thanks.
I have been reading PT forums extensively since i found it for past 3 weeks. Great site! I'll try to keep this post as short as possible.
Background info:
I'm looking to start PI, namely acquiring one or couple rental IP's. I do not own any properties at the moment.
To the point.
I'm looking for some explanations about trusts. I have read numerous online articles and such, even at PTwiki, and still have questions regarding this matter. Almost every guide i read stated that i should seek professional advice, which is perfectly fine by me and I do intend to do it, but I want to grasp better understanding, so I can ask all the right questions. Often people warn about getting 'bad advice' from other 'people'. This is something I'm particularly afraid of and trying to get it setup the 'right way' the first time. However I have no clue how to tell good advice from bad advice and how to avoid bad one. The fact that professional advice is expensive does not necessarily mean that it's good, but how can i tell ? I'm looking for comments regarding the following:
1. Asset protection
So the main point of trust is asset protection. But i understand the safest situation is if I would be only a beneficiary, while If i'm settlor or trustee then trust is a kind of my asset and in some cases can be still 'endangered' by a legal action - assuming something catastrophically bad, which I'm not expecting or intending but such is life. Am I correct in my thinking ?
2. Gifting + ongoing gifting
say i buy a property. i have to give down payment, of say 100k. I give it to the trust. so i forget that 100k at 27k per year. But to pay if off faster i also want to make weekly contributions of say $200pw. is that 200pw also counted as gift to the trust ?
Also can i pay any expenses (rates, R+M, etc) out of my own pocket ? is it also counted then as gift to the trust ? What about improvements to the property (i spend my own money but value of trusts property goes up) ? what if i EG subdivide section owned by trust (subdivision costs + then there are 2 smaller sections)?
3. removing money from trust
haha, I'm just concerned that if giving money to the trust is so hard, taking money out of it must be harder . or is it? Say i have properties making positive cashflow. I want weekly payments to my account from the trusts account. I understand trust is taxed at 33% flat rate. Do i also have to pay personal income tax on this same money ?
If I sell the property for capital gain, say $50k, can i transfer it to myself (my own account) without any tax ?
4. managing trusts
often i come across that trust to be 'good' must be managed reguraly. what does this actually mean ? what constitutes managing the trust ? and what are the costs and obligations involved ?
5. cost to setup up trust + ongoing expenses
I called some legal company and they quoted me $3k+gst to setup a trust + $300 pa ongoing maintenance fees. I see other firm offering basically the same service (or maybe not ? i cant tell ?) for less than $1k ? is the first company trying to rip me off or they are doing somewhat different things and i'm comparing apples to oranges here ?
6. type of trusts
another topic i'm confused about. IRD mentioned 2 types - trusts and trading trusts. on the web I cam across some other names, as in family trust, property trust, parcell trust - is this all the same thing or they are actually different and where can I see the list of all available types and their particular benefits/drawbacks, etc ?
7. investment company held by trust ?
also i came across statement, that it might be beneficial to have PI company being help in a trust as a 'sole trustee', and that setup gives best asset protection and tax benefits ? anybody have any experience regarding those ?
Also.
Accounting firm i used for past couple of years are dealing mainly with businesses and their experience in property tax is rather limited Therefore
I'm looking for recommendations for some IP specialised accounting and legal advice in Auckland area.
Your feedback is greatly appreciated.
Thanks.
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