Do I need to put my home into a trust?

[Azimuth]

I think the rule of thumb suggests that if the property is making a loss an LTC is better, if it is making a gain then a trust is better. Rental losses cannot be offset against your personal income with a trust, it can only offset other profits.
Of course that is very general, and your individual circumstances might mean that the template doesn't fit.

[Rosco]

Thanks for the replies.


The accountant is a well respected property specialist but he didn't ask me a lot of questions - more like just wanted to set me up with the template they use for everybody..


Cheers

Generally a lawyer would establish a Trust, not an accountant.

As I put above and others have also put, ask your accountant for specific reasons why you need a Trust.

What was kind of mentioned above, was keeping your personal house separate from the banks. This can be done, but is often hard work. So for example
Personal house in Trust worth $500k, and $100k debt - with BNZ. further $100k debt with BNZ, secured over personal house but loaned to LTC.
Rental house in LTC, $500k and $400k debt - with ANZ. ANZ would also have personal guarantee, so could go after you personally.

So by the personal house being in the Trust, then ANZ can't get their hands on your personal house. But they could bankrupt you personally. If this was the case, would you pay the debt by using equity in your Trust? If so, the structure won't provide you anything further.

Also you still can only borrow 80% on the rental, so the other 20% or $100,000 is secured over your family home anyway. So if everything goes wrong, your family home is still liable for this.

Ross

[Wayne]

So if everything goes wrong, your family home is still liable for this.

The personal guarantee you will be forced to give the bank screws you over anyway.
Or makes you accountable depending on perspective.

[Damap]

Not if the property is in a trust. You are not your trust.

[PTILoveYou]

Not if the property is in a trust. You are not your trust.

But the bank is in the property in the trust, that's the issue.

[Damap]

No it's not. Wayne said the PG gives the bank access, it doesn't. Unless they have security over the property they have no access to other assets.
Obviously if everything unravels it becomes academic. However most people aren't doing things on a big scale so having your own home in a trust is a sound plan. It has historically been 101 for asset planning. Protect your family home.

[Rosco]

Not if the property is in a trust. You are not your trust.

But most people will use the Trust property to avoid personal bankruptcy. So this kind of undoes some of the benefit.

Agree, if a personal is happy to go bankrupt, then can use a Trust to own personal home and keep separate from other risks and other creditors including the bank.

Ross

[speights boy]

It has historically been 101 for asset planning. Protect your family home.

Or in other words; take no personal responsibility and repay a bank loan, even when other assets would enable you to do so.

Stuff the little ol' lady losing her savings when the bank is forced into OBR.
I'm alright Jack.

[Damap]

Or in other words; take no personal responsibility and repay a bank loan, even when other assets would enable you to do so.

Not at all. There are many events that can happen to people. Dishonest business partners, "acts of God", health issues, aggressive lawyers, the list goes on. Nothing to do with avoiding responsibility. I would say it is taking responsibility for your family.

[speights boy]

There are many events that can happen to people. Dishonest business partners, "acts of God", health issues, aggressive lawyers, the list goes on.

The property world is littered with characters who are quick to blame others for their own failure, or greed, or lack of business sense.
Weak minded individuals who refuse to accept personal responsibility, and are all too willing to screw over others they owe money to.

[Damap]

But that has nothing to do with protecting your family home.
And being in a major car accident, or dishonesty from another person or falling ill all have nothing to do with responsibility.

[PTILoveYou]

I think what Damap is trying to say is trust obviously benefited him greatly in the past, so OP should consult with Damap's trust lawyer ;-)

[Damap]

No not at all, it is just basic asset protection. When things fell over for us we went to the bank and told them to take our home. Took an enormous toll on my marriage but that was the right thing to do.
Protecting your family is a good idea.

Most people don't have things as extreme as we did. A trust gives you time to sort things out. Of course some people use them to rort others but some people use knives to kill people instead of cooking with them, doesn't make the knife a bad product.

[speights boy]

Of course some people use them to rort others but some people use knives to kill people instead of cooking with them, doesn't make the knife a bad product.

Handguns have severe restrictions on their ownership and use.
This is due to the belief that to free up their use would be detrimental to our society.

Perhaps it is time for some real research into how Trusts are actually being used in this country.

It would be interesting to see how much damage is being caused by people misusing them; or attempting to misuse them.

[Maccachic]

Speights they have already been blown apart form the courts and more is to come. They are really looking into sham trust from what I've been hearing from both Lawyer and Accountant.