Hi all, hope I can pick someone's brain on this one.
Is it possible to set up a family trust while waiting for settlement? Or must the trust be set up first before we make an offer?
I need to quickly secure a property, is it possible to:
1. offer in "my name and or nominee" subject to finance
2. set up the trust, apply for finance (already have pre-approval in my own name)
3. settle as trusteePlus, if there will be 2 individuals as trustee (me and my partner), would it make any difference?
Many thanks for your help!
Hi j900
Couple of points.
1) The Trust Deed will need to be formed and dated prior to the date of the purchase contract so it needs to be established prior to signing.
2) Signing as "And or Nominees" can attract double Stamp Duty in certain States so should be avoid.
3) Your financier will require the Trust Deed up front to assess the suitability for lending so strongly recommend you give it to your Broker as early as possible.Remember the loan will be in the name of you as Trustees on behalf of the Trust so will need the name for the loan application.
Richard Taylor | Australia's leading private lender
A few more points:
1) A trust can take as long as 2-3 to set up and receive all the necessary paperwork (trust deeds, tax file number, ABN etc)
2) Home loans in the name of a trust usually come under ‘business financing’ with the bank so you will need to go through a different loan application then if you purchased the property in your own name
3) Some banks only allow 80% LVR on properties purchased with a trust4) Why set up a trust if you and your partner will be the trustees??? That doesn’t offer the best asset protection and it just makes life hard for you. The trustee is responsible for the trust and in many cases if the trust is sued then the trustees are liable.
Generally people set up a trust with a non trading company as the trustee and you and your partner would be directors of that company. This is not financial advice see an accountant before you go ahead and set up your trust.Ryan McLean | On Property
http://onproperty.com.au
Email MeThanks to both Richard and Ryan. Your comments are very much appreciated. Give me more bullets and substance to work with when I see my accountant next.
Ryan…
"4) Why set up a trust if you and your partner will be the trustees??? That doesn't offer the best asset protection and it just makes life hard for you. The trustee is responsible for the trust and in many cases if the trust is sued then the trustees are liable."Where did you get this info from? DFT has NO asset protection at all.. did you invent it yourself ?
A discretionary trust has asset protect. I must admit though I don’t no the difference between a discretionary trust and a discretionary family trust…is there are difference?
With a discretionary trust, having a company as the trustee offers great asset protection in the case of a lawsuit. The trust may be liquidated but all your other assets aren’t then up for offer.
Ryan McLean | On Property
http://onproperty.com.au
Email MeA trust only takes half an hour to set up. It is a relationship evidenced via a deed. Some all you need, once you have worked out what roles people will play, is some signatures. After that your deed may need stamping, depending on the State it is established in (QLD never had this requirement in the past, not sure if things have changed). Usually you can set the deed up and worry about stamping much later.
Whether banks treat loans for trusts as commercial or not will largely depend on the trustee – if it is a company or not. I am not aware of any lenders that restrict lending to 80% for trusts.
Trustees can be liable and their personal assets at risk if they are sued in their capacity as trustee. Having a company is much safer – but whether you need a company or not will depend on what the trust is doing, eg if just investing in shares, then there is no risk. If investing in property the risk is low, if investing in business then the risk is very high. Having individual trustees also makes things easier in terms of getting loans.
Assets held in trust are also exempt assets for bankruptcy purposes, so discretionary trusts are very good for asset protection – no matter who the trustee is.
A family trust is just another name for a discretionary trust. Its not the name that is important but the wording of the deed, so you may have a trust called Smith Family Trust, but you could have non family members as beneficiaries as well.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry
I agree with you that company as a trustee has better asset protection, but you probably need to get a commercial loan. I am not aware that with the company as a trustee you can get a simple home loan package (i.e. breakfree ANZ/ CBA Wealth package).
There are certainly lenders who offer standard resi loans with Corporate Trustees albeit the 2 you mentioned do not.
Not aware of any lenders that restricts lvr to 80% when lending to a Trust.
Richard Taylor | Australia's leading private lender
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