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If different assets are contributed to a Unit Trust, say one real estate property in San Francisco and one real estate property in Los Angeles, can the Deed of Trust specify 2 classes of beneficiaries/unitholders: "San Francisco" unitholders and "Los Angeles" unithoders, each receiving the rental from the respective asset?

If answer is "yes, it's possible", would there be an advantage (tax/cost/other advantage) in having just one "flexible" Unit Trust and then amending it to include more assets and more classes of unitholders VS setting up a Unit Trust for each asset?

  • Here I think I found a partial answer: legalvision.com.au/… So, from the article, I understand that (in Australia) a Deed of Trust can specify different classes of units... though the article does not offer more details on this point. EDIT: found another article giving more details; posting as an answer – moumous87 Oct 10 '18 at 8:30
  • Why would you ever want to use such an odd choice of entity? Also "Unit Trust Deed" and "Deed of Trust" are not equivalent terms. A "Deed of Trust" in California is the moral equivalent of a mortgage. – ohwilleke Oct 10 '18 at 14:26
  • @ohwilleke I meant Trust deed... why would I choose a Unit Trust with classes of units as I've described? I don't know... that's what I'm trying to figure out :) but I'm guessing that having a Unit Trust for each asset would be better... just I need to find out what are the costs associated with setting up a Unit Trust – moumous87 Oct 10 '18 at 16:15
  • The down side of using a Unit Trust in California is that this is a quite unfamiliar form of business organization which at a minimum would cause professional advisors like accountants and realtors and title companies brain damage and probably extra costs dealing with something "exotic' and also has fewer legal precedents to provide certainty. Unless there is a good reason to do otherwise, a limited liability company would almost always be the entity of choice to hold real estate in California. – ohwilleke Oct 10 '18 at 17:16
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Here I think I found a partial answer:

http://www.tved.net.au/index.cfm?SimpleDisplay=PaperDisplay.cfm&PaperDisplay=http://www.tved.net.au/PublicPapers/April_2006,_Sound_Education_in_Taxation,_How_to_Set_Up_a_Unit_Trust.html

So, from the article, I understand that (in Australia) a Deed of Trust can specify different classes of units with varying rights attached to them.

Then the article goes on saying:

As in the case of companies, there are various classes of units which can be issued and rights which pertain to these. These may include (but are not limited to):

  • Discretionary units – which entitle the holder to an entitlement to the income and/or the capital of the Unit Trust. The Trustee may determine to exercise a discretion to make a distribution to such a unitholder in a similar way to a discretionary trust. These units may also be called Special Units and a Unit Trust with discretionary units may also be referred to as a Hybrid Trust in that it is partly a discretionary trust and a Unit Trust;

So, "discretionary units" already give a great deal of flexibility in the way income is distributed to unitholders... and on top of that, different classes of units could still be defined. At least, this is my understanding... and based on Australian law only... Still hope to get a better answer from someone more knowledgeable than me :)

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