Trust
Trust could be Express Trust, Implied Trust and Constructive Trust. An express trust is created by a deed – by clear words and the intention to create trust. An implied trust is that the law implies has been founded, based on the circumstances, and that there would be an injustice if a trust wasn’t implied. Constructive Trust is a kind of implied trust, that the law constructs to make sure that justice is met.
Protecting assets with a Trust
A trust is a useful vehicle as the individual does not own the assets, but rather the trust. Individual only control it but does not have ownership. if the individual is sued, the assets in a trust are safe.
Who Owns the Trust Property?
Unlike a person or a company, a trust is not a legal entity that can own property. This is because a ‘trust’ is just a relationship between the legal owner (the trustee) and the beneficial owners (the beneficiaries). As such, documents including a house title, share certificate, or members’ register will list the trustee as the property owner.
Transfer Property into a Family Trust
Trust can be a vehicle to hold your property or to purchase a new property.
Transferring your individually owned property title to the trust, meaning you are transferring the interest to the trustee, the trustee will be the new legal owner of those assets.
Property can either be sold to the trust or by way of a gift to the trust.
Gifting Property to a Family Trust
Transferring property title to a trustee by way of gift, the trustee and the trust will have to sign a gift deed, which shows the ownership of the property is being transferred without payment.
If you have an outstanding home loan on the property, and the loan is being transferred to the family trust, the trustee will have to get loan approval.
Can I Transfer Property I Already Own Into a New Trust?
If you set up a new trust, you can transfer property that you already own into it. You should know that the transfer of property into a trust will generally be classed as a sale. This can be an expensive exercise as, in addition to the appropriate sales contracts/agreements, this can incur Capital Gains Tax and stamp duty. Ensure that you speak with an accountant if you’re looking to establish a trust and transfer existing property.
Selling Property to a Family Trust
Selling property title to the Family Trust is the same process as a buyer and seller entering into a contract for sale. The trustee would be the buyer.
Capital Gain Tax & Stamp Duty
Capital gain tax will be triggered regardless of if the property is gifted or sold.
CGT is exempted if you sold your home. Otherwise, depending on individual circumstances, you may be eligible for a CGT discount.
Stamp duty is a state-based tax, payable when transactions over dutiable property occur, meaning the transfer of the ownership of dutiable property takes place. The dutiable property includes real property, eg land or real estate, shares, and units in a unit trust.
Land tax
Family trusts do not benefit from the land tax threshold while individuals and companies benefit from the land tax-free threshold and are not liable to pay land tax on land valued at up to 750,000.00
Transfer property out of the trust
If the trustee wishes to transfer the property from the trust to an adult child, stamp duty and capital gains tax will be payable if the property has increased in value. CGT may be reduced by 50% if the trust owned it for more than 12 months.
Wills and Estate
When parents get older, they cannot leave the property owned by a Family Trust to their children in their Wills.
Can a Trust Trade as a Business?
Approximately 5% of all businesses in Australia operate through a trust structure. If you are going to run a business through a trust, you will require an Australian Business Number. As with all trust property, the trustee will own the business’ assets.
Speak to CFS Legal dedicated lawyers in confidence for Trust Deed advice. Email: info@cfslegal.com.au.