Asset Protection - Registered Mortgage

Hi,

I have been listening to a CD about asset protection and the use of a registered mortgage to protect your PPOR. The idea was that a mortgage is taken out over your PPOR by a seperate entity, say a trust. This provided protection of the asset, whilst still permitting the CGT benefits when selling your PPOR.

A few questions:

1. How do you set up an RM?

2. Can the RM be taken out on a property which is unincumbered?

3. Do you need a seperate RM for each property? Why?

4. We are established investors, who now purchase property using a
discretionary trust with a corporate trustee. However our original
purchases were made in our own names. Can an RM be used to
to protect these assets?
 
Could be showing my ignorance here - isn't a registered mortgage just a mortgage? In that case, you probably already have them taken out on most of your properties. In terms of the entity that takes out the mortgage - it wouldn't effect cg tax as what matters is the name the asset is bought in. You would just need to convince your lender to allow a company or trust to take out a mortgage on a property you own(you may already have these set up too given your current structure)

anybody feel free to correct me...
 
Hi BH,

I came across an article few months ago about type of asset protection for your PPOR via an internal debt between you and your family Trust.

You need help from an accountant who knows this procedure and your bank officer to set it up. You need to borrow the market value of your PPOR and gift it to your Trust. The Trust will lend the money to you interest free to pay back to the bank. The Trust has 1st morgage over the house....

It prevents to sell of your PPOR if you ever get sued .

I'm considering this option as well. Does anyone know a good accountant who can do this for us?

Regards

Huey
 
Last edited:
ok so I was showing it (not my assess, my ignorance) happy to learn something new

But I have heard that even having a standard bank 1st mortgage on any property is likely to make a potential litigator less likely to bother (say its for 80% - with a firesale price they may get nothing) sueing.
 
Sorry about my bad English. In addion to that I've mixed up words very often in the last few years. The word "assess" used to come up many times everyday in my last job so it's not a surprise to me when it comes up wrongly in my writing. I've been worrying about Alzheimer's disease. :eek: :(

Regards

Huey
 
I do remember receiving a business soliciting letter from some accounting firm mentioning the strategy that you are talking about here. Will try to look it up and if successful will post back here.
 
Found it! The letter was sent to me in 2003 by a Gold Coast Lawyer.

The procedure is as YH2000 had stated, and the followings are mostly copied or summarised from the letter:

You set up a trust with yourself as the trustee(or setup a company as a trustee)

You gift an amount of capital equal to the equity you have in your home and an other investment assets wich are in your name. The gift should not exceed your equity n these assets asthat could make ou insolvent.

Your trust then loan the amount back to you, with a loan document, a mortgage and possibly, other security to guarantee repayment. (no interest would be payable and no repayment would be made unless demanded by the trustee)

The setup has to be in place at least for 2 years before effective against a bankruptcy claim.

And as unsecured creditors rank second to secured creditors,if your home was sold by a trustee in bankruptcy, the proceeds would go to the secured creditors first.


Interestingly, according to the letter, this "Family Protection-Beta Strategy" is patented!

The letter went on to suggest that to put off paying the stamp duty on the mortgage by postponing registering the mortgage untill a claim is actually made against you. I am not sure whether this is a good idea, as if there is an existing mortgage on your home, it will act as a deterrent to litigation as the potetial reward has disappeared.

I myself do not think this is necessary a good strategy, depending on each indivdual's circumstances of course.

1) to start off with the PPOR has to be unencumberred by the sound of it, and it would be difficult or at least more complicated to asses the equity in your home for investment purposes...etc.

2) stamp duty involved can be somewhat costly

3) trust structure is not necessary a bad thing as it offers many other benefits but I think it can be ultilized differently and more effectively. (possibly cross-securitization?)

4) probably not suitable for IP as most of them would already be heavily mortgaged anyway.

5) yes, you probably need a seperate RM for each property but for the reason stated above, you probably would not want to do it for each property anyway unless you have 10 unencumbered properties all sitting there!

Those are my thoughts on the matter anyway, and please comment if I am wrong as I am myself very much a beginner on this matter of asset protection.

Cheers
Kwan

PS: Cross-securitizing involves using your existing loan in your trust. You ask the bank to overstamp the mortgage security held to include all the equity in your privately named properties. So a search done on your personal asset would shows that all your asset have been mortgaged to the hilt and it would be fruitless to sue you.

Link to previous discussion on Cross-Securitizing. wbthom has shed some light on the subject:
http://www.somersoft.com/forums/showthread.php?t=18860
 
Back
Top