Trust startup loan

I'm sure Terry probably has a tip regarding this, but I thought it quicker to test the forum for a quick answer.

Does anybody have a generic loan template for the initial capital loan from a trustee to the trust for a discretionary investment trust startup and initial investment.

Any pitfalls I should be aware of for the initial deposit of funds into the trust?

 

What does this mean?

 

You would need to seek legal advice and get documents drafted to reflect the terms

 

You could use a set amount as the initial capital or “settled sum” I think the term is when the trust is established. No need for a loan schedule then. But as Terry said, your trust deed would need to set these terms out. Get someone who knows what they are doing, trust deeds are easy to get wrong.

Are you talking about an individual lending to a trust? Is that individual the trustee or the beneficiary? What are the terms of your loan to the trust? Is it interest bearing? When is it repayable? Few things you might need to consider.

Not so many issues with initial deposit of funds, just pay it into trust bank account. But lots of things to consider when you want to withdraw funds. Div 7a can also apply to related party loans.

Just my 2c.

 

I have a legal tip on this topic. Called funding a trust or similar

 

Hi,

Thanks.

1. Yes, individual lending to the trust.
2. Yes, that individual is the trustee and also a beneficiary.
3. Non-interest bearing loan, long term loan.
4. No repayment specifically, purely to function as a way of recouping the initial capital startup and all capital inputs from future trust distributions as tax free.

Thanks Terry, will have a read.

 

op, why have you chosen to use an individual trustee?

 

Legal advice would also be needed concerning a statute barred loan and the measures you need to effect. This may limit or prevent a human trustee too. If this trust is acquiring property it may already have indicators of being a poor setup. Could a hybrid disc trust be an alternative ?

One issue a lawyer should certainly advise on is the asset protection limits that this loan may create. ie If A lends to Trustee then A still has an asset available in bankruptcy.

 

A trust is not an entity so cannot borrow. A person cannot lend to themselves either. You need to consider where the money being lent is coming from and also consider the limitations act.
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