Loan Tip: Loans for Trusts and Appointor Issues

Discussion in 'Loans & Mortgage Brokers' started by Terry_w, 25th Oct, 2021.

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  1. Terry_w

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

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    When a ‘trust’ gets a loan it will be the trustee that is the borrower with the directors of the trustee company giving guarantees – this is the general method anyway.

    Nearly all lenders will want to review the trust deed and one thing they do not like is if the appointor is someone other than the directors of the trustee. This is probably because the appointor can instantly remove the trustee once the loan is settled so they want the appointor to be a party to the loan, either as a guarantor or a borrower.


    Example

    Bart sets up the Bartard Family Trust, which is a discretionary trust with Bart as the trustee and his dad Homer as the appointor.

    The trust will be buying a property and borrowing money. Bart will be the borrower, and mortgagor, but the bank sees a 3rd party as appointor so they refuse to lend.

    Bart seeks legal advice and amends the deed to replace Homer with himself, so Homer is no longer appointor and Bart is now the appointor.

    Lender approves.



    Example 2

    Lisa sets up a discretionary trust with Lis Co Pty Ltd as the trustee. Lisa is the sole director and shareholder of Lis Co Pty Ltd.

    Her brother and sister are the appointors of the trust, for family law asset protection purposes.

    Lis Co Pty Ltd applies for the loan with Lisa as the guarantor.

    The lender doesn’t like the fact that she is not an appointor and asks for a personal guarantee from Bart and Maggie, her siblings and appointors.
     
  2. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Lenders are increasingly figgety about some trust arrangements:
    • Additional or even parent appointors
    • Unit trusts where some of the unitholders arent also trustee Directors
    • Some hybrid trusts with some lenders (arises from older tax ruling concerns)
    • Non income earning spouse as the sole trustee Director. They will usually want the main income earner involved.
    When someone proposes a new trustee borrowing etc I always suggest the finance issues are explored with a BROKER early on so any issues can be addressed.