Hibrid Discretionary trust

Hi,

I’m not a big fan of these as I view it like neapolitan icecream – it has a little bit of everything but not enough of anything.

A hybrid trust incorporates a mixture between fixed entitlements (like a unit trust) and discretionary entitlements (like a family trust).

I’m yet to hear a good argument for why a hybrid trust is needed, when a unit or a family trust seems to be a cleaner and better option.

I’ll talk about unit (fixed entitlement) trusts in the next newsletter.

For those interested in detailed structuring information, I draw your attention to the recently released Wealth Guardian product.

Regards,

Steve McKnight

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Remember that success comes from doing things differently.
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Hybrid trusts are the best option for people who wish to negative gear as you cannot get these benefits through a discretionary trust.

Hi,

Just be careful.

Losses can not be distributed from a trust, only the profits flow through to the beneficiaries.

Losses on the other hand, are accumulated in the trust to be offset against future income.

Bye,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

One more thing on hybrids. I have heard that banks do not like lending to Hybrid trusts, so it may be harder to get finance. Although I am a mortgage broker, I have no experience in this area. Could any other brokers out there please comment? Or anyone with a Hybrid Trust?

Terryw
[email protected]

quote:

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One more thing on hybrids. I have heard that banks do not like lending to Hybrid trusts, so it may be harder to get finance. Although I am a mortgage broker, I have no experience in this area. Could any other brokers out there please comment? Or anyone with a Hybrid Trust?

Terryw
[email protected]

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With regards to borrowing to buy units in a Hybrid trust, we have had success with CBA,Westpac and Bankwest ( St george will not borrow under this structure). Typically the lender will place a mortgage over the property and require the trustee of the Hybrid trust to commit to a commercial guarantee.Extra paper work is involved, however providing the trustee or directors of the corporate trustee and unit holders of the Hybrid trust (borrowers) are one and the same, finance is generally accessible.
Re use of chris batten services.
We have had some involvement with the use of Hybrid trusts from chris batten,would be happy to answer any queries.
Kind Regards
Ryan

All,
lending in a hybrid trust structure is generally done by almost all lenders. The key to success are a few things:

Keep it simple, by that I mean to have the title in the trust name but do the borrowing under your personal name with the trustees signing as guarantors (yes, in most cases these people will be identical, but that’s the way the banks like to see it).

Do not try to get too sophisticated with purchasing and selling of income units, this will just scare the hell out of banks and the chances for getting a loan are extremely slim.

Another funny thing is with professional packages (discounts), some banks tend not to give discounts for lending in a hybrid trust structure (such as ANZ and I believe also CBA and NAB). Other banks treat loans for a hybrid trusts as commercial lending and have a whole new set of rules available. Other banks still give decent discounts for lendings in a hybrid trust.

With all this in mind and looking at the other responses way up your risks/benefits such as professional packages and negative gearing vs asset protection in a hybrid trust structure.

I hope this helps a little bit.

Yours sincerely
Rolf Schaefer
RJA Financial Services Pty Ltd
Accredited Mortgage Broker
Tel: 03 9753 9044
Fax: 03 9753 9055
Mobile: 0422 907 022
E-mail: [email protected]