Discretionary trust

Viewing 6 posts - 1 through 6 (of 6 total)

mattfrommalvern
Member
@mattfrommalvern
Join Date: 2010
Post Count: 3
May 20, 2010 - 4:35 am
hi i have a discretionary trust with a corporate trustee and family members as beneficiaries. The trust has significant losses in it and as such a considerable liability to the beneficaires who have been pouring in their own funds. The three businesses that operate under the trust are now starting to make profits but in the meantime – Can the loan in the trust owing to the beneficiries be converted to equity?? or by its nature is this not allowed in a structure with 'discretion' to income and capital. thanks
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
May 20, 2010 - 6:14 am
Not sure exactly what you mean by equity – are you asking if the people who loaned money take a percentage of the business instead of getting their money back? If so, wouldn't it be better if the trust were to use the losses to offset the gains and repay the loans?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email Me
Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
mattfrommalvern
Member
@mattfrommalvern
Join Date: 2010
Post Count: 3
May 21, 2010 - 1:42 am
Not sure exactly what you mean by equity – are you asking if the people who loaned money take a percentage of the business instead of getting their money back? YES
The idea behind it is to clean up the balance sheet and convert that $$ owed, into some sort of interest/equity in the trust and get the liability off the BS. We plan to offset the losses against profits, but that will take time, perhaps 5-6 years.
perhaps this is not a possibility within an DT ?
Any other suggestions? Thanks for you response

Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
May 21, 2010 - 1:56 am
I am not sure about this – I am not an accountant
The trustee is the legal owner of the business so it would have to transfer portions of the business to the beneficiaries. I guess it could be done. There may be CGT implications though.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email Me
Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
mattfrommalvern
Member
@mattfrommalvern
Join Date: 2010
Post Count: 3
May 21, 2010 - 2:18 am
thanks i will do some more investigating
infra
Member
@infra
Join Date: 2010
Post Count: 3
May 21, 2010 - 5:17 am
Mattformmalvern pm or email me me I am in public practice I may be able to point you on correct path, however 1st i will need to know more detai in regards to the structure that you have for the ownership of business etc…
cheers.