Bare trusts

[MasterInvestor]

hello

One of my clients (I'm a mortgage broker) has received a newsletter mentioning "Bare Trusts". I have not previously heard of these:
http://www.lawcentral.com.au/CreateDoc/createlink.asp?DocId=121

Apparently you can form one of these trusts, buy a property under the trustee's name and then transfer to the beneifical owner later on - without stamp duty and CGT issues.

This client has an existing property but now has a few problems on his craa, so cannot get further finance - with suitable conditions anyway. he has a great deal of equity, but cannot access it.

So he is wanting to transfer his share of the property to his wife in her capacity as trustee to the bare trust. She will then refinance and will be able to increase the loan.

In 4 years when his problems drop off the craa, she would then transfer back to him.

He wants to know if this would be possible??

I have no idea, and told him to talk to a solicitor and accountant.

From a loan perspective, I suppose it would just look like the wife buying the husband out and the lender would not know about their little agreement behind the scenes. I suppose she could just buy him out, but he would have to pay a lot of CGT on the sale, and there may be stamp duty as well.

They are NSW residents, and it is an investment property.

Just wondering if anyone has any comments of this situation?

[duncan_m]

Apparently you can form one of these trusts, buy a property under the trustee's name and then transfer to the beneifical owner later on - without stamp duty and CGT issues.



From a stamp duty perspective, at least in South Australia you dont need a special trust to do that. Transferring an asset from a Trustee to a beneficiary can be achieved without stamp duty.

[NigelW]

hello

One of my clients (I'm a mortgage broker) has received a newsletter mentioning "Bare Trusts". I have not previously heard of these:
http://www.lawcentral.com.au/CreateDoc/createlink.asp?DocId=121

Apparently you can form one of these trusts, buy a property under the trustee's name and then transfer to the beneifical owner later on - without stamp duty and CGT issues.


Yes but all trustee's meetings must be held in the nude.


This client has an existing property but now has a few problems on his craa, so cannot get further finance - with suitable conditions anyway. he has a great deal of equity, but cannot access it.

So he is wanting to transfer his share of the property to his wife in her capacity as trustee to the bare trust. She will then refinance and will be able to increase the loan.

In 4 years when his problems drop off the craa, she would then transfer back to him.

He wants to know if this would be possible??

I have no idea, and told him to talk to a solicitor and accountant.

From a loan perspective, I suppose it would just look like the wife buying the husband out and the lender would not know about their little agreement behind the scenes. I suppose she could just buy him out, but he would have to pay a lot of CGT on the sale, and there may be stamp duty as well.

They are NSW residents, and it is an investment property.

Just wondering if anyone has any comments of this situation?

From a CGT perspective you look through to the ultimate beneficiary anyway...so no issues there.

From a SD perspective there is a transfer, its just a question of what value you ascribe to the bare legal interest in half the property which is moving from husband to wife. Arguably that's nothing, but the stamps office may require a little convincing...maybe a friendly valuer could jot you a letter saying it's worth nix...ultimately it may depend on the capriciousness of the OSR officer it meets...and they're as changeable as the breeze...

Land tax may increase subject to wife's other holdings...but unlikely to be a deal killer...

Hope your client's get it sorted...I presume low/no doc is not a goer...

N.