As I’m sure we’re all aware, a great method for investing in property can be to purchase it through a trust. There are a number of benefits to property investing in a trust, such as asset protection, tax advantages and estate planning. So does share investing using a trust carry any benefits?
In my opinion, I would say… well, it depends.
On asset protection; you are not generally vulnerable from a legal perspective if a company is being sued and you are a shareholder, so there is no real need for protection from that perspective. However if, for example, you run a business – or may do in the future – then keeping your assets safe may be a priority.
The trust does give you the power to distribute profits to different beneficiaries to minimise tax payable, although if we’re talking long term share investments a lot of that income will be coming from franked dividends, so a lot or all of the tax payable (depending on your tax bracket) will have been paid for you. The benefit though comes from being able to distribute those franked dividends to beneficiaries on lower tax brackets (such as children, or a non-working spouse) to get the credits refunded in part or even in full.
On top of that the capital gains that do arise are likely to be eligible for a 50% discount (if held for more than 1 year), regardless of whether you hold in your own name or in a trust.
Trusts also cost a little to set up and maintain, which is no issue if you expect the benefit to exceed or justify the cost. Whether or not you do decide to use a trust for share investments often comes down to personal preference and priorities, and the more complicated your finances become the more likely it is that a trust could become useful. ‘Small’ investors may have no real need for such a structure, while larger players may find that the potential advantages really start to add up as their portfolio grows. As always, it’s important to start with the end in mind, so it might be worth looking at where you plan to be as well as where you’re starting from.