Why do people want to change their property’s ownership?
Most people buy their first property in their own name; they don’t buy it in a trust or company.
It's simple, straightforward, and cheaper. That’s why it often suits first-time investors.
However, as your life changes your ownership structure may also need to change. That’s part of maturing as a property investor.
Here are the most common reasons investors move properties into a trust or company.
#1 – To protect your assets
Let’s say you bought your own first home and you did that when you worked a normal job. But now you’ve started your own business, so you are a company director.
You’re now at more risk. If someone sues you, your personal assets (including your own house) could be fair game.
By transferring the property into a trust or company you can create a legal buffer.
That way if someone takes legal action against you personally, they can’t easily touch assets owned by a trust. Why? Because technically you don’t personally own it – the trust does.
But you can still get the benefit of living in it.
#2 – When you get into a relationship and you want to separate assets
If you’re in a relationship (or you’re starting a new one) ownership structures can help separate your assets.
Let’s say you bought an investment property before meeting your partner.
A few years later, you move in together. After a few years everything becomes relationship property.
That means if you split up your partner could be entitled to half your investment property, even if you bought it before the relationship started.
So, some investors choose to move properties (especially investments) into a trust. Then you might create a contracting out agreement with your partner, and in that agreement you might agree the trust’s assets are off limits.
But just keep in mind that a trust on its own may not protect you. The courts can still challenge a trust if it was set up to deliberately dodge the rules.
Just keep in mind that I’m not a lawyer, but this is one of the reasons clients tell me they want to set up a trust. So it’s a good idea to talk to a lawyer and get advice before you do this.
