5 benefits of using a family trust to invest in property

Published on November 26th, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Most people think that when it comes to money and investments its best not to involve family, as this will always resolve in a squabble of what belongs to whom. However, a family trust fund is here to eliminate this. There are perks on having a family trust fund to invest in things like property and we have five.

Asset protection

This could be your biggest draw card in the sense that the property is not held by an individual, but is held by the trust. What this means is that the property is protected from creditors or other financial institutions looking to reposes valuables when a family member could have defaulted on their financial commitments.

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With a family trust fund the more you divide the value of property, or money amongst the beneficiaries the less likely it is to attract a large tax bill. If distributed in a tax savvy manner, by using the marginal tax rate to divide amongst the number of beneficiaries you might have, it could be reduced to zero. In addition, it also assists in helping your family accumulate wealth quicker. You could give up to $416 each year to children below the age of 18 years. Furthermore, if the property has been held in the trust for more than a year you get to pay 50% capital gains tax.

Cost effective

We all know the adage, “It takes money to make money,” and this couldn't have summed up the meaning of family trusts. This is in a cost-effective sense. Establishing a trust fund doesn’t take much money when you look at the long -term returns. Setting up a trust fund generally costs between $100 and $700 depending on which state you are doing it in. The same goes with accounting fees which vary between $500 and $2,000 year by year.

Retirement boosting

A trust can provide long term accumulation of wealth and tax benefits. What this means for you is that when you combine the accumulation of funds in both your superfund, and trust can make for a comfy retirement. The perks of a trust are that you can access your funds anytime, allowing for an early retirement before the money in your superfund is released.

Generational wealth

This is kind of a no brainer. Investment such as property which have been secured in the family trust can be passed on from one generation to the next. The advantage is that it will never incur any stamp duty, or other expenses. Having a trust deed governs what will happen to the shares of each beneficiary in the event of death. You can stress less over a Game of Thrones succession among the family in terms of who is next in line to own the property.

A family trust can assist in saving on taxes when it comes to your investment property, and leave your loved ones with some money in their pockets. It’s always best to speak to a professional financial advisor who can advise you on what steps to take next to maximise your investments.

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