Expert Guide To Purchasing Property Under A Trust | North Rocks Mortgage Solutions
North Rocks Mortgage Solutions recognises that purchasing property under a trust can be a strategic move for asset protection, tax planning, and succession management. Regarding property ownership, a trust is a legal framework in which a trustee holds property on behalf of the beneficiaries, who benefit from the property's income and capital growth.
Different Types of Trusts for Property Ownership
When buying property under a trust, numerous trust structures can be used to satisfy different needs.
Discretionary trusts
confer absolute discretion upon the trustee regarding the application of income and assets. This is another reason discretionary trusts are favoured to govern family wealth.
Unit trusts
Unit trusts provide beneficiaries with fixed units, which entitle them to a proportionate share of the property's income and capital. They are widely used in investment properties.
Family trusts
Generally, family trusts are discretionary trusts that are used mainly to preserve and manage family property wealth, particularly when such property is transferred to subsequent generations.
Benefits of Buying Property Under a Trust
There are various advantages to purchasing property under a trust that goes beyond ordinary property ownership:
- Asset Protection: Placing property in a trust protects it from prospective creditors and legal action. This is especially advantageous for those with high-value assets or company interests.
- Tax Efficiency: Trusts can facilitate strategic income splitting by dispersing income among family members or beneficiaries in lower tax bands, lowering the overall tax burden.
- Succession Planning: Trusts facilitate property transfer to beneficiaries without probate, ensuring smooth generational transfers.
- Flexibility: The trustee can manage and distribute property as needed, providing greater control over the asset.
Steps to Purchase Property Under a Trust
Purchasing a property under a trust takes careful preparation and execution. Here's how to get through the process:
Establish the Trust
- The first step is to create the trust. This includes drafting a trust deed that specifies how the property will be administered and who will profit from it. Consult a solicitor to ensure that the deed is correctly structured.
Secure Financing
- Obtaining a loan for a trust-owned property can be more complicated than personal ownership. At North Rocks Mortgage Solutions, we can assist you with navigating this procedure and obtaining the appropriate financing.
Complete the property purchase
- Once financing is secured, the trustee will purchase the property on behalf of the trust, ensuring that all legal and financial requirements are met.
Legal and Tax Implications
When buying property under a trust, there are several legal and tax implications to consider:
- Capital Gains Tax (CGT): Trusts are liable to CGT when the properties are sold. Some once more are exempted, and these include family trusts.
- Revenue Tax: Income from any property sale is consolidated at the trust level on revenue tax, and the beneficiaries will pay revenue taxes on any distributions received.
- Trustee's fiduciary duty: In this regard, a trustee has a legal duty to act in the best interest of the beneficiaries, which assures that a trust deed handles the property.
Start your home journey under expert guidance
North Rocks Mortgage Solutions has the strongest expertise in making clients acquire property ownership through trusts. Call us today to start your journey of brilliant property ownership.
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