People new to property often ask about trusts: “Do you think I should have a trust?” Now that is almost like asking: “How long is a piece of string?” There is not a one-size-fits-all answer to this question.
So let me give you a few pointers:
It is more important to invest in property than it is to have a trust. We will look at some advantages of trusts just now, but being financially free is more important than having a trust.
You owe it to yourself and your children to be financially free. It is admirable to want to leave a legacy for your children, but is more important to be financially free and not a financial burden on your children than it is to have a trust.
A trust is fine, but it also costs money to set up and to run. It is fine if you can afford it, but from what I said above, I would rather use as much money as possible to acquire as many properties as possible before I have a trust.
Now, I am not against trusts, absolutely not. I am against the idea that EVERYBODY MUST HAVE A TRUST or they cannot invest in property. I see too many people who are so entangled with trusts that they forget about property.
As your property portfolio increases, you will “grow into” a trust. As your portfolio grows, you get wealthier, your cashflow increases and so does your knowledge. In time you will have the money and knowledge to have a trust.
Having said that, let me add this: some people are already earning a lot, they have major assets, they have knowledge and experience, in other words, they can afford a trust, then they should get a trust as soon as possible.
What am I saying? I remember when I was still young and studying, I went with my brother in law (a newly qualified lawyer) to a financial advisor. They advisor asked me what I do and when I said I am a student he was not interested at all. He said I must phone him sometime in the future. By that time I already owned my first investment property! But I can remember that I really felt offended. So in a gentle, non-offending, way I am trying to convey the message that you need some money and financial sophistication before you get involved with trusts. The good news is: start with property, and it comes very quickly.
It is like most things in life: crawl, walk, and run. First things first. Do the right thing for you.
Should you have a trust? I really don’t know, unless you tell me what you do, what you earn, what you have, how you are married (hopefully happily?). You see, the right answer depends on your personal situation.
Tomorrow we look at the pro’s and cons of trusts.