Should I Buy Property in My Name, Trust or Company

Deciding how to hold property is one of the most important choices for any investor or homeowner. The decision to purchase property in your personal name, through a trust, or via a company affects taxes, liability, control, and future flexibility. Each option has its own advantages and drawbacks, so understanding these differences can help you make a clear, confident choice.

An individual assesses the exterior of an investment property, taking notes on a clipboard, to evaluate its structure and potential.

Buying Property in Your Personal Name

Purchasing property in your own name is the most straightforward option. It means you are the legal owner, and all rights and responsibilities belong directly to you.

Advantages

• Simplicity: The process is simple with fewer legal and administrative steps.

• Lower upfront costs: No need to set up a trust or company structure.

• Full control: You make all decisions without needing approval from trustees or directors.

• Capital gains tax discount: In many countries, individuals receive a discount on capital gains tax if the property is held for more than a year.

  
  

Disadvantages

• Personal liability: You are personally liable for any debts or legal issues related to the property.

• Tax implications: Rental income is taxed at your personal income tax rate, which could be high if you are in a top tax bracket.

• Estate planning challenges: Transferring property after death may require probate, which can be time-consuming and costly.

  
  

Holding Property in a Trust

A trust is a legal arrangement where a trustee holds the property for the benefit of beneficiaries. Property trusts are common for family assets or investment purposes.

Advantages

• Asset protection: The property is owned by the trust, which can protect it from personal creditors.

• Estate planning: Trusts can avoid probate and allow smoother transfer of assets to beneficiaries.

• Tax flexibility: Income can be distributed among beneficiaries, potentially lowering overall tax.

• Control: Trustees manage the property according to the trust deed, which can include specific instructions.

  
  

Disadvantages

• Setup and ongoing costs: Establishing a trust requires legal fees, and annual administration can be costly.

• Complexity: Trusts involve more paperwork and legal compliance.

• Limited borrowing options: Banks may be hesitant to lend to trusts or may charge higher interest rates.

• Capital gains tax: Trusts often do not receive the same capital gains tax discounts as individuals.

  
  

Purchasing Property Through a Company

Buying property through a company means the company is the legal owner. This structure is common for investors with multiple properties or those seeking limited liability.

Advantages

• Limited liability: Shareholders are generally not personally liable for company debts.

• Tax planning: Companies often have a flat tax rate, which may be lower than personal rates.

• Easier to raise capital: Companies can issue shares to raise funds.

• Succession planning: Shares can be transferred without changing property ownership.

  
  

Disadvantages

• Setup and compliance costs: Companies require registration, annual reporting, and accounting.

• No capital gains tax discount: Companies usually pay full capital gains tax on property sales.

• Double taxation risk: Profits distributed as dividends may be taxed again at the shareholder level.

• Less flexibility: Company decisions require board approval and compliance with corporate laws.

  
  

Factors to Consider When Choosing Ownership

Choosing the right ownership structure depends on your personal situation and goals. Here are some key factors to weigh:

• Purpose of the property: Is it for personal use, rental income, or long-term investment?

• Tax position: What is your current income tax rate? Would a company tax rate be more beneficial?

• Risk tolerance: Are you comfortable with personal liability or do you want to protect assets?

• Estate planning needs: Do you want to simplify passing the property to heirs?

• Financing options: How easy is it to get a mortgage or loan under each structure?

• Costs and complexity: Are you willing to handle extra paperwork and fees?

  
  

Practical Examples

• Example 1: Sarah wants to buy a family home for her and her children. She chooses to hold the property in a family trust to protect the asset and make passing it to her children easier.

• Example 2: John is a high-income earner investing in rental properties. He buys in his personal name to take advantage of capital gains tax discounts but plans to switch to a company if his portfolio grows.

• Example 3: A property development group forms a company to buy multiple properties, limiting personal liability and simplifying management.

  
  

Consult with Family Officer

Family Officers provide innovative solutions to empower families alongside their financial partners. They serve as the connection between families and financial professionals (such as accountants, financial advisors, and lawyers), ensuring families make informed decisions. Our model is based on the percentage of savings we achieve, allowing us to manage all your communications from a centralized location and assist with strategic planning for family and administrative functions without costing you more.