Unlimited borrowing using Family Discretionary Trust

Can a director of a company that doesn’t exist yet pay a deposit on behalf of a trust that doesn’t exist yet?

How can a trustee of a non existent trust enter into a contract?

This is all very messy. You run the risk of the asset not being owned by your trust, and double stamp duty being applied when you want to move it in there.

not a lawyer but even I know there are multiple problems here…

 

Yes, but will it be effective? No

Yes but not as trustee

 

There is a possibility that the payment of the deposit creates a duty concern. The trust deed is potentially dutiable not for advalorem duty on the deed but for the physical property transfer as the dutiable value as that event brings the trust to existence. I have seen OSR Vic and NSW both attack this under this view and it hasnt met with great legal remedy. Basically a double duty problem. From recollection the issue is like a bare trust initially and then the trust settles. Something like it. One of them then tried to fix it and OSR argued three settlements. Conveyancer got involved as I recall. Costly duty legal advice followed. Double not triple duty at the end. And a hefty legal bill

Or you can take legal advice and setup things before putting pen to a contract. Easy solution. And not any extra cost.

 

This is madness....what happened to KISS (Keep it Simple Stupid)?

This might cause a rethink....

12ft |

 

Curious to know if this approach worked out for you ? Settled 2 properties at the same with the same lender on 2 different trusts

 

So I have a discretionary with a corporate trustee that owns around 750k property outright with no loans. I have just bought a new ppor for 1.5million with cash (temp loan from family member). My household income is around 250k per annum previous brokers I have talked to have never suggested what is in this thread they also said I could borrow up to 1 million. Is there a way I could borrow say 600k against the trust without it affecting the household borrowing capacity? As I would like to then borrow 1million against the new ppor. To repay my family member

 

You 'have'?

Your comments are vague so not sure who is borrowing what.

How did the trust get the money for the trustee to buy the property without borrowing for it?

You could potentially borrow using the assets owned by the company as trustee if the trustee has the power to let beneficiaries do this. Lenders generally won't like it as you do not own the property. But it is possible in theory. But this, like any loan, will affect your borrowing capacity.

 

Yes have

The trust was loaned 600k by me to buy the properties. So if I was to get loans on the properties in the trust it would repay me the 600k.

unfortunately I am not the mortgage broker so I would hope they would be able to tell me how to set up the loans. Also yes I am a little vague as this is a public forum so I’m not going to tell everyone everything.

why would I not be able do what the original poster suggested?

thanks for the help Terry but I would not use your services as I don’t think we would work well together

 

I would like to do what he learned from the experienced mortgage broker, who do I go to/contact. To set this up?

 

You can't have a discretionary trust in the way that you can 'have' a company which you can own. With a discretionary trust all you can do is control it and be a potential beneficiary.

You would probably want the trustee to get the loan on the trust properties to repay you? That would be easier than you borrowing against property you don't own.

Now the question might be would the trustee borrowing affect your personal borrowing capacity? If you were to give a personal guarantee it generally would with most lenders, but not all lenders.

You don't need to give any details, but to answer the question you need to explain a bit such as who is borrowing. It seems you a mixing a few things up, Brokers can't give legal advice so you would need to work out who would be the borrower and what is going on before you or the trustee could apply for the loan.

To have the trustee borrow and it not affect your personal borrowing capacity?

You possibly could, but it won't work if you are borrowing against trust property.

 

Sorry I can’t understand why my situation is drastically different from the original poster. My situation is the exact same as him. But your answer is completely different from the responses he received.

 

the original poster suggested you can borrow with a discretionary trust. Without it affecting your personal borrowing capacity. I don’t want to know all the details. I want the name of a mortgage broker i can contact, or a lender I can contact to do this.

 

which response are you referring to?

 

'you' cannot borrow with a discretionary trust without it affecting your borrowing capacity. But a company can borrow without it affecting your borrowing capacity.

 

Here is one response

 

I get you want perfect wording but we don’t all do this all day everyday. Isn’t it obvious I am looking to set up the trust loans in a way that doesn’t affect my borrowing capacity

 

Think it through. I have explained it clearly in this thread I think.

 

Which banks are easier to lend to discretionary family trust. I understand not all banks lend to family trust

 

The only lender that won't lend to trustees of discretionary trusts for residential property, that I can think of, is ING.