Hello & a question about LAQC's

[dazer]

Hello everyone, as you can see I am a newbie to this forum but have been watching this site for a while and I am most impressed with the expertise and wealth of knowledge out there.
My situation is I am single, in my mid thirties and live in Nelson were I own my home. I currently have three rentals properties down in Christchurch (last one brought a couple of years ago and all managed by a property manager). My question is in relation to structuring my finances, I have seen and had many discussions about LAQC's and can understand why they would be good for couples (i.e. allocation of income/losses per shareholding) but don't see any advantage in using an LAQC in my situation in fact it would cost more (not just changing to an LAQC but the ongoing compliance costs). I would like to buy some more properties in the near future (once the market settles down?!?) and wondering whether I should be looking at an LAQC at that stage. I know a company (or LAQC) sounds good on paper but don't see much financial advantage for someone in my situation, does anyone have any thoughts or suggestions?

P.S. The BNZ Mortgage Manager rang me yesterday to let me know that BNZ is now offering 7.15% fixed for two years. Its nice to finally see some serious competion between the banks!

[pixie]

Use a company LAQC structure

hi - many, many times I have thanked the stars above that I have used a LAQC / company structure.

As you know the losses can be used to reduce your taxable income (ok you do that now). Secondly it is easy to change shareholdings without having to pay significant costs to change the ownership of the property. Next the property, being in a company structure, is removed from you just a wee bit more - this is great from a debt management point of view and helps separate you (the person) from your investments. I have found this invaluable when dealing with the banks who want to have hooks into everything they possibly can by way of guarantees and assurance. We have two companies and we have managed to keep their mittens off one of them. It might not sound like any big deal but it is better to have a flexibility in your banking relationships if you have several properties.

Plus you don't know your future - what if you want to undertake a business venture? Do you really want your property mixed up in all of that because there is absolutely no way past that "mix" if you and your investments are one and the same entity and you want to borrow money to finance your business venture.

We are in the process of moving properties to our Trust - only it is not the properties that we are moving but the ownership of the shares and our personal loans. Again the process is vastly improved and less expensive than if we personally owned the property. Plus we are keeping the benefits of attributing the losses for another year or two.

Frankly being a single person you might consider a) the benefits of an LAQC for yourself but also b) the benefits of a Trust for protecting your property against the claims of future partners. I still managed to get taken to the cleaners in spite of a pre-nup after 3 years of marriage. Rebuilding lives post relationship breakups is common but should not result in financial devastatiion for those who bring assets to the relationship. Do have a think about protecting you (the person) from bankers and future partners.

[Storm]

We are in the process of moving properties to our Trust - only it is not the properties that we are moving but the ownership of the shares and our personal loans. Again the process is vastly improved and less expensive than if we personally owned the property. Plus we are keeping the benefits of attributing the losses for another year or two.

Hi Pixie,

I'm interested to see that although you have transfered your shares to a trust you state that you, as the beneficiary of the trust, can attribute the losses your the LAQC to your personel income. How can this be done as trusts are unable to distribute losses to beneficiaries?

Regards

Storm.

[pixie]

hi
the gifting program is set up so that we will effectively move personal loans ahead of the shares. This means that we get the benefit of the LAQC status for another few years before having to say it is time for the shares to go across to the Trust.

It is simply about timing - we haven't (yet) moved them across. The loans move and the Trust can decide each year whether to charge interest on those loans etc etc.

If one of us dies meanwhile, the wills simply put everything into the trust immmediately.

It works for us because we are rapidly seeking to pay everything off - obviously everyone needs to get the advice that suits their requirements.

:-)

[Storm]

Interesting. The wonderful world of business - an endless puzzle.
Thanks Pixie.

[drelly]

A bit off track but I'd like to ask Pixie how s/he was taken to the cleaners even with a pre-nup??? (if you don't mind explaining)

[whitt]

Drelly

the longer a couple with a Pre Nup is married in Nz the less enforcable it is. I can not remember the exact year figure as mine is pretty much worthless now.

A properly constructed Trust is the safest way to protect your interests long term.

[janesco]

Another way is to have nothing worth covetting.... I think I prefer the trust option

Sorry guys it's late at night and I'm feeling a bit frivolous.