Bill and Jen protect their home from law suits
For many Australians, the lions share of their wealth is in the equity in their home which they hold as sole tenant or perhaps as a joint tenant with their partner or spouse. Should they get into hot water and cause someone loss or become involved in litigation, a successful claim against them could lead to a seize and sell order in order to satisfy the debt. If the house is worth $600,000 and the mortgage is sitting at $300,000, the equity in the property of $300,000 could then be applied to paying the debt.
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Bill and Jen lived in a lovely rural country town in Queensland. Their home was a family home that had been passed on over the generations and held in Jen’s name. The couple had also purchased an investment property at a coastal town as joint tenants. The combined equity of these properties was over one and a half million dollars.
Bill and Jen were concerned decided to see what options were open to hedging the wealth that was in their hands. They consulted with me via a video teleconference. Holding the property in a Trust with a corporate trustee was the recommendation. A standard transfer of the two properties into the trust would raise stamp duty on the two properties of about $30,000. Instead we suggested a Gift and Loan back strategy. The new Trust entity was established. Then the equity in the properties was gifted entirely to the Trust by the owners. The Trust then loaned back the equity and takes a mortgage over the properties which are then registered on the title. The total costs were $4,850 saving the couple about $25,000 in duty.
Things to note about this legal solution.
All of the transactions must be properly documented for this strategy to provide legal protection;
It cannot be used to avoid liability that is already raised;
There is a four year claw back period should litigation be looming in the near future.
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If you would like a complimentary consultation about how this legal strategy could be used to protect your family’s wealth then we invite you to book a discovery call today.
