I bought a property via family trust, the trust has no money so I will loan it some funds for upcoming settlement. From accounting perspective, do I need to physically transfer money to the trust and then transfer the money to the Seller, Or can I transfer money directly from my personal account to the Seller and then note down this was a loan to the trust?
A trusts isnt a trust if it has no property. How could the trustee buy a property for the trust if there are no assets ? It could be that the trustee has acquired the property. And moving the funds as proposed would be evidence of that. What occurred with the settlement sum for the trust ? That could be a issue to avert a mess if the trust does have "property" eg cash its potentially OK. Q : Do you have a signed deed on paper that has also been stamped ? Did you set this up youself ? These are all the common mistakes "DIY" trust formation can cause. To answer your question - I NEVER recommend that a beneficiary (you) pay funds directly. Instead yes you should open a bank account (settled sum plus ?) and then go through the annoying and slow process of money transfers or bank cheques at extra cost. If its ever questioned then its suitable evidence that the trust property was acquired by the trustee using funds from you. If you LEND the funds to the trustee on terms involving interest this must also be documented as a loan - Seek legal advice. Also where is the property ? If its in NSW has the land tax issue been addressed ? This is a combination of issues and are further issues common to DIY arrangements - Non resident beneficiries are excluded in the deed ? - No land tax threshold
This is a legal question. You should lend the trustee the deposit, under a written loan agreement. If you are the trustee you will have issues as you cannot contract with yourself. If lending to the trustee there is no need to transfer to the trust account first. It can be paid by direction - it is like when you borrow from a bank, the bank doesn't pay you, but pays the vendor at your direction. You could transfer to the trust's account though. This might even help defeat later claims against resulting trust arguments. As for interest rate you could have market rate, under market rate or nil interest - something else to get some legal advice on as well as tax.
There are a number of questions. who is the trustee? What name is on the property sales contract? Is the trust already in existence (based on the stamping date)? Is there a mortgage involved, and how is that structured?
