Loan against trust equity for distribution to a beneficiary

Discussion in 'Finance & Banking' started by MaxwellSmart__, 3rd Sep, 2014.

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  1. MaxwellSmart__

    MaxwellSmart__ Member

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    Hello all,

    I am the director of a trustee and I wish to distribute some of the trust's equity via a loan, to a beneficiary.

    The equity is invested in ASX shares.

    Can someone please advise which lender they recommend?

    Thanks for your help.
     
  2. MaxwellSmart__

    MaxwellSmart__ Member

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    Given there has been 60+ views and no responses, I question whether my question was clear.

    My situation:
    - Director of a corporate trustee.
    - The trust owns a significant amount of Australian shares.
    - The trust reinvests all dividends.
    - I desire to take a loan out over this equity and lend it to a beneficiary.

    Does anyone here do above?
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    You want a margin loan over shares to lend to a beneficiary? I can't help with a lender, but does the trustee have the power to do this?
     
  4. MaxwellSmart__

    MaxwellSmart__ Member

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    That is correct Terry.

    A similar situation to when an investment property accrues in value and the equity gained is distributed to beneficiaries by loan.

    The trustee has power to do this.

    Cheers.
     
  5. GregReid

    GregReid Well-Known Member

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    Not sure who would do this but some lender will. You would need to go to the private banking or business lending areas.
    Why not sell some shares and then simply lend the money from the proceeds?
     
  6. MaxwellSmart__

    MaxwellSmart__ Member

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    If shares are sold, the trust will incur transaction costs and CGT tax implications.

    If the trust borrows money, it will have none of these and also benefit from a taxable deduction from the interest on borrowing.

    Cheers.
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Interest on borrowings to fund discretionary payments to beneficiaries? Have you sought advice on this?
     
  8. MaxwellSmart__

    MaxwellSmart__ Member

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    Deductibility - Interest on borrowings to fund a loan to a beneficiary?

    I have. I'll acquire more prior to actioning.

    Cheers.
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    I would argue that the interest is not deductible to the trust as it doesn't relate to the production of assessable income.

    Do you have an authority which says otherwise?