A Hybrid Trust is a mix between a unit trust and discretionary trust.

You borrow money in your own name to subscribe to units in
the Hybrid Trust. The interest is deductible against the rental income
distributed to you by the trust.

The issue the ATO have with a Hybrid Trust is where units are redeemed for
their face value as the property becomes positively geared. They also attack
these trusts where the units are redeemed so that any capital gains can be
distributed on a discretionary basis.

From an asset protection point of view, the increase in value of the asset
will be free from potential creditors. In the case of bankruptcy the units
held, are assets of yourself and could be redeemed for their face value.
This will generally pay out the loan and as mentioned any increase in the
properties value will remain within the trust.

In regards to costs, depending on the costs expect around $2,500 set up with ongoing fees a similar amount.

Trusts also restrict your financing abilities as some of the banks restrict trusts from accessing certain loan products.
Setting up a Hybrid Trust is not without risk from a Tax office perspective,
and is generally for people who have high income levels and are involved in high risk activities such as operating a business  and require a level of asset protection whilst maximizing tax benefits.

Technorati Tags: Asset Protection, Discretionary Trust, Hybrid Trust, Trusts

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