What are the Pro’s and Con’s?

+1 with TerryW

I setup a hybrid trust in 2006. In 2008 when I went to purchase another IP in the trust, discovered the banks generally wouldn't lend to a trust structure. Had to buy the next IP in my own name, lost all the Pro's but still have all the Con's TerryW lists above.

My 2c Worth

If you have mortgaged IPs held under your name I can only assume that when you die your bank will sell them rather than allow you to give them to somebody in your Will. My logic is that they don’t know the credit history of whoever your beneficiaries so why would they allow the mortgage owners to change name (?)

Therefore I imagine this would be a good reason for IPs under a Trust, if your intention was that your portfolio continues to grow, acheive capital gains, and rental cashflow for your family even when you pass away.

Any other thoughts on this?

Sorry, not talking about flats but the units issued by a trust.

What happens if someone dies and leaves a property with a loan on it to someone is that the testator may or may not deal with the loan in the will.

1. If they have other cash they may direct that the loan on 23 smith st be paid out of the residue of the estate.

or

2. If there is no mention of how the loan will be delt with then the loan goes with the property. In NSW this comes under the conveyancing act. If this is the case then the recicpient will have to take the property with the loan and will have to pay out the loan or apply for their own finance to continue the loan. If they don't then the executor may have to sell the house and distribute the proceeds to them.

There are also tax issues to consider such as when to sell and who gets taxed – the estate or the recipient. This will depend on the circumstances.

With trusts its different as ownership doesn't change. Beneficial ownership doesn't change, but if you are individual trustee of a trust and die then the title of the house etc must be changed. ie the legal ownership must change. There may or may not be stamp duty issues depending on how the trust is set up but should be CGT free.

If a company is trustee then legal ownership can stay with the company. Hopefully the deceased would have arranged for a suitable person to hold or control the shares of the company and the can then appoint themselves as director and control the trust.

But either way the loan on the property will have to be redone. Banks won't allow a dead person to guarantee the loan and dying would be a breach of the loan agreement so someone else would have to step in and guarantee the loan or the property may need to be sold.

many issues to consider.