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Legal Tip 39: And/or Nominee contracts and Asset protection

Discussion in 'Legal Issues' started by Terry_w, 27th Jul, 2015.

  1. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    And/or Nominee contracts and Asset protection


    I have seen a few clients sign contracts for land as “XX and/or nominee” and then want to nominate a trust before settlement not realising the asset protection issues - not to mention the stamp duty issues.


    The person who enters a contract will be liable if things go wrong - not the nominee. So by entering the contract is your own name that will mean you are exposing yourself and your personal assets. Not a biggy, but still relevant.


    But more of a potential issue is the concept of a ‘resulting trust’. This will be an event bigger issue where the person has paid the deposit for the property already (such as at auction). A resulting trust is trust based the law of equity. Where A has paid for a property that is in B’s name it will be presumed that A is the equitable owner of the property. This is a rebuttable assumption so can be disproved. But on face value it could be argued that a person A paying a deposit for B has an equitable interest in the property being purchased.


    This presumption will be even more stronger if A has entered the contract in A’s name, even if there is an ‘and/or nominee’ after the name.


    If A went bankrupt it is very possible that the trustee in bankruptcy for A (ie the creditors) could argue that the trust owned property really belongs to A. This is because A entered the contract, A paid the deposit and A nominated the eventual buyer. it may even be A that is paying the loan for the trust.


    This goes whether the nominee is a trust, or a spouse or other family member.


    Tip - get your structures set up before attempting to buy, and make sure monies are in place.
     
  2. alvaro86

    alvaro86 Member

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    Based on this and/or nominee that you mentioned, can a person buy a property and specify on the contract "and/or nominee" and then transfer it to another person before settlement? If say, A transfers it to B who is not a family member, is there 2 lots of stamp duty payable or just the one?

    Thanks in advance
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  4. CU@THETOP

    CU@THETOP Well-Known Member

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    One of the gurus was spouting "or nominee" clauses a few years ago without any idea of the legal consequences- more as a back up way of changing purchasers when you just had to get the deal but hadn't done your groundwork.