When you purchase a property, you can buy it in your personal name, a company name or even a trust. The trust must be set up before hand and have a trustee to manage the trust (which could be yourself or a company you own). Now, why should you undertake a complex procedure like this to buy a property? Well, there are several reasons why savvy investors do this and here are some of them that can help you decide whether you too should follow this strategy.
This is one of the top reasons why people opt for a trust to buy and hold their properties. The assets held by the trust are safe even if you have to declare personal bankruptcy. This means that your creditors can create a lien on your personal assets but not on those held through the trust. The property cannot be taken over in lieu of your debts by any creditor. Of course, there are conditions that apply, namely that the property should have been purchased via the trust a specific number of years before your bankruptcy situation. If you want to make sure that the property is protected for your future generations, this advantage makes a trust a good choice for you.
Fewer complexities in transfer
A trust makes it easy for you to ensure that the property passes on to your heirs quickly and without legal complexities in the event of your death. This is one good reason to consider if you expect someone to challenge the claim of your heirs to your assets in particular. Buying and holding your property through the trust makes your stance clear on what you want to be done with the property, and the procedure for transfer of rights is clear cut too with a trust.
Of course, the tax benefits are a big plus point for buying and holding property via a trust. It may be possible to avoid a big chunk of taxes including capital gains and stamp duty when the property passes to someone within your family, provided it is held in a trust. This gives a significant financial benefit to your heirs.
Please note that it is important to decide on the buying entity before signing a contract or there could be potential implications, such as stamp duty issues. We also strongly recommend that you seek the advice of an accountant regarding tax and other financial benefits regarding trusts.
If you want more information or help with buying a property via a trust, approach a professional law firm in Queensland, Australia.