Family Trust for IP

Hi,
I set up a Family Trust with myself as the Trustee to buy a property with my daughter (20 earning 70K).
I believe I get the Loan in the name of The Trustee for xxzzzxx family trust , is that also the Deed of the property and how is it that my daughter goes onto the loan as well if I am the only Trustee ?

 

seek legal advice

A trust is not a legal entity so the owner of the property will be the trustee. If that is you, then you will be the one on the title. Since you own the property you would also be the borrower. The loan will be in your name in your capacity as trustee.

As your daughter is not an owner she will have a hard time being a borrower. She might be able to go on as a guarantor in some instances, but this will be difficult too. Seek credit advice on this aspect.

 

Personal trustee of a family trust. Why? Your description of 'buying a property with my daughter' is very confusing.

What is the purpose of this? If negatively geared losses are trapped in the trust.

What's the plan for the property in the future? It doesn't form part of your estate, and you can't transfer it to her easily without stamp duty and capital gains tax. Why wouldn't your daughter just buy an IP herself?

 

is the daughter a co-owner?

 

I want my daughter to be co-owner.
Perhaps better to have both of us as Trustees ?

 

What is the point of using a trust here? Why can't your daughter just buy the IP in her name? Lend her the deposit (not that that's a good idea either)? Or you just buy the IP in your own name only?

What's the actual purpose here?

 

I am splitting payments and any risk with my daughter. I am told that if I get the loan and property in both of our names, then when she wants to buy a house to live in she will be assessed on loan serviceability based on complete mortgage of full investment property, even if we are joint owners.

 

If she can't afford an IP on her own she shouldn't be buying, Especially if she wants a PPOR later on.

Even assuming you could get this joint thing happening, what will you do if she needs the borrowing capacity, or the money, later on?

What does she think about all of this? Does she want to do this or is this you thinking it's a good idea?

She's 20. If she's switched on and wants to invest, she will. If she's not and you force her, she'll resent it the first time she has to make a choice between the mortgage payment and something else.

 

I want my daughter to be a co-owner but that

I would like my daughter to be a co-owner but don't want it to negatively impact her borrowing capacity later on for a PPOR. I set-up the trust as a Discretionary Trust with me as the Trustee and Appointer. I didn't sign contracts yet, so maybe it will be a bad idea to use the family trust for this property. It will likely float around neutral, maybe slightly negative or slightly positive...

 

Yes , I clearly didn't think this through properly. My main goal was to protect my daughter from future serviceability issues on a PPOR loan.

 

Step back. Way back. Why do you want her to be a co-owner at all? Because you think owning property is a good idea and she doesn't have enough to buy one on her own? She asked you to help? You think being a co-owner will teach her financial discipline? What does she think of this idea? What savings does she have?

If you articulate the reasons, people might have better suggestions.

 

I feel this will be a good investment for the two of us to have together, get her some capital gains prior to her owning PPOR. She has enough savings for at least half the deposit. Although, we will use equity in my PPOR for 20% and then get 80% of loan for IP. We split all costs, although may run positive even before depreciation. She can keep her saved 'deposit' and keep saving at the same time, all while hopefully building some equity in the IP.

 

What do you mean by co owner?

 

If you haven't signed contracts seek legal advice as it is cheaper to fix now than after contracts entered

 

Going on a loan will affect serviceability down the track.

 

I suppose it isn't important if she officially owns half but this investment would be for her to shar in half of the capital/gain equity gained in the house, without hurting her serviceability of getting a loan later for a PPOR (have been told by a couple people that having the house in my name and hers jointly, would mean she would be judged on her ability to service the entire IP loan, even though only on it jointly). So, I guess my options are:
1. Put it in the family Trust that I am the Trustee of but pay slightly more land tax on that property, not be able to claim depreciation , or 2. Put it in my name only and just transfer her the equity if we sell it (she is aware this is a long term investment for at least 10 years) or 3. Put jointly with my daughter and risk her having serviceability issues with a PPOR down the track.

 

Sounds like you haven't set up the trust yet. Why not get some legal advice on the other options

 

The family Trust is set-up with me as the Appointer and Trustee but I haven't signed contracts yet. That is likely to occur next week.