Asset protection structure

Lee asks:
(updated on Friday, April 06th 2018)

Following a marriage separation I built a property in my name which I moved into two years ago. The land was purchased in 2013 and the property's current value is $1.07 million. I have since met a new partner and we have built a house together to blend our families later this year. I wish to rent my existing property long term and also to keep it safe from my ex and new partner if required.

The debt on the house is $200,000 fixed for four months and I have personal debt of $500,000 on the new property ($250,000 fixed for 20 months and $250,000 floating). Out of a Look Through Company (LTC) and a Trust, what is the best set up for me? And what would the set up costs and annual costs be?

Our Experts Answer:

The interest on the new debt to build the new home will not be deductible against the rent from your old one. You could restructure the old home into a LTC that borrows to buy from you to provide the equity to pay down the new home build debt. That would seem to be more tax efficient but remember that this will re set the bright line test. Also, the new government is set to ring fence rental losses which probably means changes to the LTC rules are on the way.

If the new home is joint with your new partner and you are then contributing personally to reduce the mortgage you will be effectively making this contribution to relationship property. It may be possible to enter a relationship agreement that specifies your contribution as separate property but this could be problematic with a joint family home. What is tax effective is not necessarily safe from a matrimonial perspective. You will need to seek legal advice on the relationship property matters.

Heartland Bank - Online 6.69
SBS FirstHome Combo 6.74
Wairarapa Building Society 6.95
Unity 6.99
Co-operative Bank - First Home Special 7.04
ICBC 7.05
China Construction Bank 7.09
BNZ - Classic 7.24
ASB Bank 7.24
ANZ Special 7.24
TSB Special 7.24
Unity First Home Buyer special 6.45
Heartland Bank - Online 6.45
China Construction Bank 6.75
TSB Special 6.75
ICBC 6.75
ANZ Special 6.79
ASB Bank 6.79
AIA - Go Home Loans 6.79
Kiwibank Special 6.79
BNZ - Classic 6.79
Unity 6.79
Westpac Special 6.39
China Construction Bank 6.40
ICBC 6.49
SBS Bank Special 6.55
Kiwibank Special 6.55
BNZ - Classic 6.55
Co-operative Bank - Owner Occ 6.55
ASB Bank 6.55
AIA - Go Home Loans 6.55
TSB Special 6.59
Kainga Ora 6.99
SBS FirstHome Combo 6.19
AIA - Back My Build 6.19
ANZ Blueprint to Build 7.39
Credit Union Auckland 7.70
ICBC 7.85
Heartland Bank - Online 7.99
Pepper Money Essential 8.29
Co-operative Bank - Owner Occ 8.40
Co-operative Bank - Standard 8.40
First Credit Union Standard 8.50
Kiwibank 8.50