Should I buy property in my name, company or a trust?

Should I buy property in my name, company or a trust?



hello everyone my name a corporate commercial attorney we specialize in structures and tax and property and I'm going to talking to you guys about a couple of queries that are frequently asked by property investors or persons acquiring residential properties for themselves first issue we're going to tackle today is what options do I have when I'm looking to acquire property Drybar that into my own name do I put it in a closed corporation if you can still get one you can't get them anymore Pui limited or do I have a trust as an option which is often a mythical entity of your second debate today so really it's a question of what are your short-term your medium-term your long-term objectives are you buying to hold the property for your personal use is that a holiday home is it a commercial property or you and investor so we could elaborate and spend quite a lot of time the different options but essentially two main points that one needs to think about and if this is a property for you personally what risk are you exposed to as far as we concerned any person who faces any risk should ideally be looking to have this property in an entity other than in your own name clearly if you have a good sued or you're in business you have exposure buying a property's a major purchase it's a large acquisition lots of costs involved so if you own the wrong structure not really easy to move the property into the appropriate structure if you made the wrong choice so colorada if at all time thinking was going to assessing which is the best option for you so option one is default most people buy property into their own name right very simple it's in your name problem is if you run into trouble you could lose your home that's not ideal at some point we will die don't know anyone who's immortal so yep you're eventually going to snuff it and on your demise you're going to have some serious issues to deal with property is caught up in your frozen estate your spouse or dependents other person's children don't have access to this asset until such time as your estate is wound up there could take anything from about eight nine months to one two three four five years so you're going to be creating serious hardship for whoever's going to be needing to access their property or the rentals or whatever the cases pretty expensive exercise to die so try and avoid it at all costs but your death will cost you capital gains tax the maximum rates at this point is thirteen point six percent so it's a fairly huge chunk that is going to be coming out of any growth of the property so you want to spare that in mind if the properties in your name on your demise on top of that you on your estate like you you will be subjected to executive fees also the maximum legislated rate of 300 percent less VOT just under four percent again a massive chunk and the kicker here is for you to consider that this is a charge on the gross value not on the net value quick example property is worth five million you have a mortgage of four million your net is 1 million your executor is taking porpoise into the five million not the 1 million so suddenly it's a massive cost on a small percentage as seems pretty harmless then of course you are subjected to state duty at a rate of 20 percent on any assets in excess of the 300 million so pretty steep so if you're buying a property in your own name just know that you have no asset protection is subjected to potentially massive costs on the DeMars and again if you are renting your property are not very tax efficient if you are in the top tax bracket because that rental income will be added to your income further causing new tax sort of issues or more tax to pay other options or close corporation if you can still get your hands on one or you have one or Pty Limited a lot of people do consider this as an option because it is a known type of entity and sauce pretty much has settled the taxation around this so there's some level of comfort problem with us is a closed corporation or company it's not the ideal residential property owning entity because you will eventually pay too much tax as well compared to a trust which we're going to talk about in a minute so PT y CC your tax rate is 28% to get the cash out of a company P or the CCA we're paying a fee the dividends taxed bringing you effectively to a tax rate of thirty eight point eight percent also default positions you can have a trust owning a company that in turn owns your property you are multiplicative extra costs which you can possibly avoid by a more simplified structure not a great structure a CC or PTY if you ever selling a property because you can end up with a huge capital gains tax problem in the company of the CC at an effective rate of 18.6% to get your hands on the profits after tax cost you fear the dividends tax of 15% bringing your total tax ball to just under 31 percent so that's algae so in your personal name the text is a little bit better but you have exposure to creditors you have got issues on death you have no continuity CCP you are solving some of the problems but not ideal from a tax perspective then we come to the mythical trust which there are proponents you absolutely love them or you have the naysayers who absolutely anti them and there's a lot of uncertainty because the taxation tends to be under the spotlight quite often of trust default position though is it's an old entity it's been around forever in this country almost 200 years a trust very simply is like a vault I like to have people think of it as a vault you're going to acquire your property into this entity tax is brilliant in the structure because you can move the income out of a trust so even though it is an entity with the highest tax rate at 41 percent after the new budget a couple of weeks ago the trustees are got the election to push any rental income down to beneficiaries who can pay at their own marginal rates so this is where you have four or five children or you bring in your mom or your in-laws as many benefices as you'd like to obviously then minimize your tax position also capital gains tax wise if you distribute you're going to have beneficiary it's going to be quite axe effective trusts are very handy as an estate planning tool you will end up in a position where the assets will continue to exist in this entity that your demise will not affect the ownership of the property because of trust doesn't die recently in our law there's no limitations or a limitation on how long a trust can exist so can continue perpetuity so great estate planning tool all your hard efforts and your legacies will continue future generations no capital gains tax on death because of just doesn't die notice state duty on death Kurt Russell and Dino executive fees so it's pretty handy so just to wrap up in conclusion the three options available to you or for if you take the CC bind to our name okay not very tax efficient if you at the top tax bracket assets exposed to creditors on your demise of a trouble CCP you are but better than personal but still not the ideal vehicle when you look at the massive capital gains tax consequences extra costs etc so for us if you're looking for the whole package it's trust that you should buy it into however caveat what is your strategy short term medium term long term okay always a residential commercial property so there's no hard and fast rules that hopefully this is giving you a bit of heads up on different options available to you get you thinking about what's ideal for you you

Comments

  1. humming g

    Major reasons why people choose Reputed Builders when it comes on buying their home.
    http://urbanrise.in/blog/trusting-a-brand-name-matters-in-real-estate/?utm_source=youtube&utm_medium=Backlink&utm_campaign=Nasrun

  2. videosrus99

    It would help everyone and save wasting time if it was highlighted that this video refers to SOUTH AFRICA.

  3. Victor D. Romero

    Please do not be offended but I cannot understand what you are saying. Are you talking about laws outside of the United States??? Thanks for your time.

  4. Empire Wealth

    This is a great overview by Jose Delgado from iProtect. There is no one size fits all and he is absolutely correct when saying that it depends on your short, medium and long term objectives. When deciding on your structure, the considerations can be summarized as follow:

    1. You want to ring fence your assets and liabilities from creditor risk.
    2. You want to pay as little as possible tax.
    3. You want to minimize your estate costs for your beneficiaries' benefit, at life and death.
    4. You want to simplify and maximize your property financing potential.

    Your structure is fundamental to building a successful property investment empire.

  5. Mordy Katsevman

    how much does it cost in the legal fees to prepare a trust tax return and how often does one have to do it?

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