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Legal Tip 83: What is a Bare Trust?

Discussion in 'Legal Issues' started by Terry_w, 7th Oct, 2015.

  1. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    A bare trust is a trust where A holds property for B absolutely. There is no discretion involved as the beneficiary is absolutely entitled to both the capital and the income of the trust. There is no nudity involved either.

    An example would be Mum holding property for a minor child. When the child reaches 18 they can demand title be transferred to themselves.

    A bare trust can also be used to hide ownership - you want to buy the property next door, but don’t want the neighbour to know you are the potential purchaser so set up a Bare Trust and have the trustee enter the contract and purchase the property.

    There are CGT exemptions on the transfer from the trustee to the beneficiary and most states also provide stamp duty exemptions. Proper evidence will be needed to demonstrate the trust relationship was in existence from the beginning - as you can imagine it would be open to potential abuse were this not to be the case.

    A bare trust can work well where there are 2 parties wanting to buy one block of land and then split it with each party taking one block each. This is normally a CGT event and a dutiable event, but combined with a deed of partition it may be possible to avoid both by using a bare trust. See

    Legal Tip 77: Joint Purchasers of Land and deeds of partition
    https://propertychat.com.au/communi...urchasers-of-land-and-deeds-of-partition.3888
     
  2. jaybean

    jaybean Well-Known Member

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    Should I go through a lawyer to set one up? Darryl sent me a template once and it was so simple.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    that depends on your level of understanding, how confident you are and your risk aversion levels!