Hi everyone
I have recently set up my own SMSF with my wife and have encountered a problem that is very annoying to say the least. The problem is the bank! I was under the impression that the only loans you can use are limited recourse loans and whilst we have finance approved they are asking for both me and my wife as directors of the company to be guarantors so in the event of defaulting on the loan they can attack our personal assets if there is a shortfall of funds once they sell the security property. Although we never want to default this does not sit well with my wife and I. I think we may of found a way around this however, and I need some advice on whether it is possible or not. We are thinking of removing my name off our house deed and removing my wife from the super fund as director etc, is this at all possible? That would then ensure that when going through the financing of any future properties and they ask for a guarantee from me as the sole director of the SMSF there is nothing that I own in my name outside of super, as it is all in my wifes name or can they still attack my wife seeing that she is married to me? We have had no choice but to sign the contract this time as settlement for our 1st IP in the SMSF is in less than 2 weeks. Chances of defaulting with only 1 property are slim, however the more properties that we have the problem would only compound I think.
Any feedback regarding the above issues would be greatly appreciated
Thank you
Newcastle Knight
Hi NK
I am not sure your Bank or Financial Adviser has advised you correctly.
What Bank is the loan going thru first.
Once we know this we can answer the rest of the question.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Richard
The loan is with NAB
It is standard practice for banks to ask for personal guarantees even for so called limited recourse loans. No breach of the SIS act either.
There are one or two lenders which can allow lending under certain circumstances so you should speak to a good broker about that.
Removing you name from title will have little to no asset protection basis at this stage. Your house would still be at risk especially in tje early years and depending on how and why you sre doing it the later years as well.
Removing one of you as director is not so simple either as all members must be directors.
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
Hi NK ok hate to say that is your problem right there.
NAB are probably one of the worst lenders in the SMSF sphere.
Sure they go to 80% lvr on SMSF but so do a lot of others without half the fees and more features.
Anyway have to say with 2 weeks to go to Settlement i think you are stick where you are.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Terry
I know that banks ask for guarantees as a standard practice however I was gullible in believing that limited recourse borrowing is just that and was quite surprised when they said that they would/could attack personal assets if default happened and they couldn't recover the money they were owed with the security property.
We were planning on removing my wife totally from the fund leaving me as the sole director and sole member. If that were to happen and basically I own everything in the super fund and my wife owns everything outside the fund how could they then attack and personal assets of mine if I was to guarantee another loan as I would not own anything (on paper anyway).
Richard
Thanks for the update on NAB, wished I had known that previously but what is life without a few learning curves. I know we are sort of stuck between a rock and a hard place on this transaction but I am going to try and make it better for the next one.
Not as easy as just removing your wife from the fund.
She would need to resign as a Director and then roll over her SMSF pot to another fund.
Then the NAB would need to reassess the loan given the balance of funds in the SMSF would be less.
As Terry mentioned most lenders require PG even in a non recourse loan.
Expensive mistake but i am sure the Banker talked a good story. Most have no idea.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
The phrase limited recourse is partially misleading. It only means, in relation to SMSF loans, that recourse to the SMSF assets is restricted.
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
Newcastle Knight wrote:Terryhow could they then attack and personal assets of mine if I was to guarantee another loan as I would not own anything (on paper anyway).
There are at least 4 grounds they could attack your personal assets
1. Transfer to defeat creditors – bankruptcy act
2. Transfer to defeat creditors – Conveyancing act
3. Constructive trust
4. Resulting trustIf you want to transfer your share to your spouse it can be done, but careful planning is needed. You also need to consider stamp duty, estate planning, and loans – for instance could your spouse qualify for a loan on her own? (if need be)
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
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