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Rolf Latham said:Hiya
I believe you are referring to overstamping assets that are outside of the trust, using assets within the trust to carry some of the load
While this increases asset protection from creditors, it does weaken the position with regard to the lender.
rolf
What if your trust held a 2nd mortgage over your PPOR or IPs in addition to the original lenders mortgage ? Would that provide the same level of asset protection ?wbthom said:Buy new property (Ignore stamp and legals for simplicity) value $300K in a trust (corporate trustee). As well as the lender taking $300K mortgage as security on the property in trust you ask them to take an EXTRA $300K mortgage (stamped and registered) against your PPOR. That means that the lender effectively has $600K security against a $300K lend and your apparent mortgage on your PPOR has increased to $500K.
Mikhaila said:Hi James,
Strictly speaking cross securitisation doesn’t help in assets protection. Drawing available equity to the max does. You can x-securitise or simply open LOC and fund any further IP/shares purchases. The bottom line is - if somebody wants to sue you need to look worthless.
M.
Rolf Latham said:Hi Bill
Sorry, bad verbage. It weakens YOUR asset protection against the lender.
Many asset protection people would argue, one structure one lender and dont pollute the structure with more than one lender (personal being the first structure)
ta
rolf
keithj said:What if your trust held a 2nd mortgage over your PPOR or IPs in addition to the original lenders mortgage ? Would that provide the same level of asset protection ?
wbthom said:Eg unprotected PPOR value $500K mortgage $200K = exposed equity $300K
Buy new property (Ignore stamp and legals for simplicity) value $300K in a trust (corporate trustee). As well as the lender taking $300K mortgage as security on the property in trust you ask them to take an EXTRA $300K mortgage (stamped and registered) against your PPOR. That means that the lender effectively has $600K security against a $300K lend and your apparent mortgage on your PPOR has increased to $500K.
Bill
agent007 said:Hi Bill, thanks for the explanation though, I have some more questions:
Going back to the same example as above, let's say that I have a LOC open against the $300k exposed equity of my PPOR (let's ignore LVR levels for simplicity of calculations). Then, I over stamp my PPOR as you mentioned for protection. Do I still have access to the $300k LOC??
Thanks,
James.
wbthom said:Hi Keith,
In some circumstances it would but you have more complexity. You must have legitimate grounds for legal entities like mortgages or a court case can set them aside as a legal fiction eg you would have to appear to have borrowed money from the trust for the trust to have the mortgage.
Proper cross securitisation is not merely cross collateralising loans
Bill
wbthom said:There is a second mortgage option idea available but it has not been tested in court yet and I won't discuss it here. PM me if you want to discuss this line further.
Bill
agent007 said:I still don't understand the difference between cross securitisation and cross collateralisation. What's the main difference?. Where do I draw the line?
If you don't mind, I'd love to hear about it.
Many thanks,
James.
Brenda Irwin said:I don't really understand why anyone would sue you to try to win all your assets. There would have to be some legal charge made, ie negligence for compensation via handing over all your assets, wouldn't there?
Say something like that did happen, ie person falls down your IP steps because you didn't keep them in good repair and they broke. I say you deserve everything you get because you were negligent, although whether compensation would be equivalent to all you net worth may be debatable.
If the person who fell down the stairs simply slipped due to their own undue attention, then they may sue subject to your insurance company agreeing whether a payout is due or not. Ten million dollars is the maximum payout of my insurance on each IP, so I'd doubt the person would need to sue me personally for the little bit more they might get of my net worth.
I tend to think that if people could spend as much attention to making good investments in the first place, rather than technical and potentially expensive asset protection structures which may or may not work in the future, they'd be far better off.
I believe honesty, openness, and integrity are the most important factors of asset protection.
Billwbthom said:Hi Mikaila,
Proper cross securitisation is not merely cross collateralising loans or drawing excess funds from an LOC - these other techniques are too vulnerable in an asset protection sense.
Bill
Brenda Irwin said:I believe honesty, openness, and integrity are the most important factors of asset protection.
Mikhaila said:Bill
Thank you for the explanations. I certainly didn't differentiate cross securitisation and cross collateralization in my mind and was talking and thinking about cross collateralization only. I stand corrected.
I understood from your posts that cross securitization is a specific procedure where money borrowed is taken only from the trust. Talking about cross collateralization, if a PPOR is provided as a security for the IP(s) than only excess of equity is exposed. I thought that it makes you unattractive target as well. Does it make a difference from the way you look as a target though (cross securitization vs cross securitization) ?
I think I understand that cross securitization will provide much better protection if in fact there is a court case against you(though from your example it is unclear why somebody wouldn’t go ordering selling IP(s) if PPOR sell proceeds went to lender to satisfy IP(s) loan).
M.