Investment structures (Famly trusts, companies, etc)

[LesHarvey]

I am looking ofr information on property investment structures such as trusts to hold residential properties in for asset protection and estate planning purposes.
I currently have a number of properties in my own name and in partnerships with up to four other people. ( all in personal names).
My research indicates that this is not an ideal situation to be in from an asset protection point of view. IE if someone sues me or any of the partners then all the properties may be at risk.
I am planning further investments in western Canada and would like to know the advantages and disadvantages of setting up a trust or company to make further investments.

 

[Alvaro Sanchez]

I would be interest to hear what you find... I am also somewhat concern about the structure more o less given the taxes that such properties might trigger once the owner passes away...

QUOTE (LesHarvey @ Feb 7 2010, 06:56 AM) I am looking ofr information on property investment structures such as trusts to hold residential properties in for asset protection and estate planning purposes.
I currently have a number of properties in my own name and in partnerships with up to four other people. ( all in personal names).
My research indicates that this is not an ideal situation to be in from an asset protection point of view. IE if someone sues me or any of the partners then all the properties may be at risk.
I am planning further investments in western Canada and would like to know the advantages and disadvantages of setting up a trust or company to make further investments.

 

[Thomas Beyer]

consider several companies .. with different shareholders.



It is hard to get a mortgage in a trust, and even if you do, you personally have to sign or co-sign a personal guarantee, thus increasing risk.



Consider a low risk asset in a company which someone else owns, say your spouse or kids. This asset transfer has tax consequences on asset transfer, but is one way to "spread the wealth".



Just because you get sued does not mean you lose everything.



You also have to have a certain networth to get a mortgage in the first place.



So consider:



I) new assets, or those with partners held in personal name or company X with you as a major shareholder. Those shares are at risk in a lawsuit, just as if you held asset personally, if you are held liable and get a judgement to pay (which takes a few years, btw)



II) Older asset, those with less leverage or no partners, or cash or private home or stocks, are held by spouse/kids in company Y or in a trust. You might manage the corporation, or the trust, for a fee, but you are not a director nor a shareholder nor a beneficiary. Then at least a portion of your wealth is protected.



If there is fraud or a judgement a receiver can go back 2 years from the incident, to my knowledge.



Other discussion, on Pro`s and Con`s of creating a company for real estate holding:

http://myreinspace.com/public_forums/Real_Estate_Discussion/62-10292-54272-To_create_a_company_or_not.html#54272

 

[LesHarvey]

QUOTE (ThomasBeyer @ Feb 8 2010, 01:07 PM)
consider several companies .. with different shareholders.



It is hard to get a mortgage in a trust, and even if you do, you personally have to sign or co-sign a personal guarantee, thus increasing risk.



Consider a low risk asset in a company which someone else owns, say your spouse or kids. This asset transfer has tax consequences on asset transfer, but is one way to "spread the wealth".



Just because you get sued does not mean you lose everything.



You also have to have a certain networth to get a mortgage in the first place.



So consider:



I) new assets, or those with partners held in personal name or company X with you as a major shareholder. Those shares are at risk in a lawsuit, just as if you held asset personally, if you are held liable and get a judgement to pay (which takes a few years, btw)



II) Older asset, those with less leverage or no partners, or cash or private home or stocks, are held by spouse/kids in company Y or in a trust. You might manage the corporation, or the trust, for a fee, but you are not a director nor a shareholder nor a beneficiary. Then at least a portion of your wealth is protected.



If there is fraud or a judgement a receiver can go back 2 years from the incident, to my knowledge.



Other discussion, on Pro`s and Con`s of creating a company for real estate holding:

http://myreinspace.com/public_forums/Real_Estate_Discussion/62-10292-54272-To_create_a_company_or_not.html#54272

 

[LesHarvey]

QUOTE (ThomasBeyer @ Feb 8 2010, 01:07 PM)
consider several companies .. with different shareholders.



It is hard to get a mortgage in a trust, and even if you do, you personally have to sign or co-sign a personal guarantee, thus increasing risk.



Consider a low risk asset in a company which someone else owns, say your spouse or kids. This asset transfer has tax consequences on asset transfer, but is one way to "spread the wealth".



Just because you get sued does not mean you lose everything.



You also have to have a certain networth to get a mortgage in the first place.



So consider:



I) new assets, or those with partners held in personal name or company X with you as a major shareholder. Those shares are at risk in a lawsuit, just as if you held asset personally, if you are held liable and get a judgement to pay (which takes a few years, btw)



II) Older asset, those with less leverage or no partners, or cash or private home or stocks, are held by spouse/kids in company Y or in a trust. You might manage the corporation, or the trust, for a fee, but you are not a director nor a shareholder nor a beneficiary. Then at least a portion of your wealth is protected.



If there is fraud or a judgement a receiver can go back 2 years from the incident, to my knowledge.



Other discussion, on Pro's and Con's of creating a company for real estate holding:

http://myreinspace.com/public_forums/Real_Estate_Discussion/62-10292-54272-To_create_a_company_or_not.html#54272




Thomas

Thanks for your response. I will need to speak to my accountant and lawyer on these in more detail.

I have also heard that properties in trusts in Canada are revalued after 20 years and assessed for capital gains. Do you know where I might find out more information on this aspect of trusts and strategies to minimise the effect of this?

 

[chrisR]

QUOTE (LesHarvey @ Feb 8 2010, 03:45 AM) Thomas
Thanks for your response. I will need to speak to my accountant and lawyer on these in more detail.
I have also heard that properties in trusts in Canada are revalued after 20 years and assessed for capital gains. Do you know where I might find out more information on this aspect of trusts and strategies to minimise the effect of this?


Tim Cestnick has written a good book called `winning the Estate planning game (Estate planning strategies for Canadians)` it is an easy read for a very dull subject but well worth the read if you want to pay less tax when you pass on, also good as an asset protection planning guide

http://www.chapters.indigo.ca/books/Winnin...m+Cestnick%2527


chris

 

[Albertritchot]

Here is a link to the T3 Trust guide from Canada Revenue Agency. You can get some initial information that will be useful for your communication and discussions with your accountant and lawyer. It does talk about the 21 year rule and deemed disposition of assets after 20 years.


http://www.cra-arc.gc.ca/E/pub/tg/t4013/README.html


Your review of structures is a very important topic and an interesting one as weill.

I would be interested to hear how you solved the risk of lawsuits, tax planning and tax minimisation.

Perhaps you will make use of an estate freeze (corporation is owned by trust which flows dividends out to the beneficiaries).

Best regards,