Bank requesting my wife be added as trustee of FT for loan

Hi guys, does anyone here have any idea why a bank's solicitors would require my wife to become joint trustee of the DFT we have applied for finance on a property purchase through?

I have not come across this before, and previously thought only one trustee was necessary for the operation of a trust?

Thanks,
 
Is her income to be used for the loan? Are you personal trustees or directors of a corporate trustee? Is she a beneficiary on the deed?
 
and previously thought only one trustee was necessary for the operation of a trust?Thanks,

I think you will find 2 people are always required to operate a trust,thats what i have always been told.I had a trustee pass away,and had to find another to keep operating the Trust.
 
If she wasn't your wife, but was your sister, I'd understand and I've seen that scenario before. Your wife however has an implied benefit and is likely a named beneficiary of the trust so it shouldn't be necessary; I've seen that scenario as well.

Which bank is asking for this?

The realistically bad news however, is that once the solicitors ask for it, there's probably not much that you can do except give them what they ask for and move on. Arguing with them tends to simply waste time and rarely comes out with a positive result.


Just an observation. If you (and your wife) are personal trustees (not directors of a trustee company), you're putting yourselves in a dangerous position. The advice from multiple solicitors and accountants is that personal trustees makes the asset protection aspect of a discretionary trust almost useless and you should always have a corporate trustee.
 
Thanks all, she is the beneficiary, I am the (personal) trustee. However this sounds, we are not concerned with asset protection in this trust, it is more of a tax vehicle for us.

Her income has been used with serviceability in this one.

The loan is with CBA, and we have sent it back to their solicitors to ask for confirmation this is required.

If so, is it difficult to add a trustee to a trust? I can't imagine it would be too hard? Some sort of resolution? (Will check Trust Deed). Confirm the trust allows the add/change of trustee structure.

Cheers
 
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To change the trustee it's a fairly straight forward process of lodging minutes to change the trustee. The people who created the trust (presumably your accountant) can do this quite easily. The CBAs solicitors will accept this.

Again, I strongly urge you to consider a corporate trustee rather than individuals. You're leaving yourselves wide open to a universe of problems.
 
PT, so I could create a company, of which wife and I are directors, then replace myself as Trustee with the company? Would this trigger Stamp Duty on properties owned by the Trust?

Thanks,
 
I've done exactly this process for myself on a Victorian property about 12 years ago and it did not trigger additional stamp duty (I was going through the same thing as you back then).

That said, it's not something that occurs often and I've never personally seen it in QLD. You should get advice on this before proceeding.

My suggestion is that if this is the first property purchased via the trust, take this opportunity to set up the trustee company prior to settlement and have the loan amended to reflect this new information.
 
Hi guys, does anyone here have any idea why a bank's solicitors would require my wife to become joint trustee of the DFT we have applied for finance on a property purchase through?

I have not come across this before, and previously thought only one trustee was necessary for the operation of a trust?

Thanks,

What right has a bank to determine who is trustee to a trust. This has far reaching consequences beyong getting the finance approved.

I suggest you change banks.

Changing trustees will also mean changing title deeds - not easy.
 
I think you will find 2 people are always required to operate a trust,thats what i have always been told.I had a trustee pass away,and had to find another to keep operating the Trust.

This is definitely not the case. Probably the majority of trusts have only 1 trustee.

Perhaps you are thinking of SMSFs with 1 member? A SMSF is a trust and a trustee cannot hold property on trust for himself.
 
The advice from multiple solicitors and accountants is that personal trustees makes the asset protection aspect of a discretionary trust almost useless and you should always have a corporate trustee.

Not true!

Property held by someone as trustee is not property that would fall into the hands the trustee in bankruptcy if that trustee went bankrupt.

However, if the trust is sued the personal assets of the trustee are exposed and therefore at risk.
 
If so, is it difficult to add a trustee to a trust? I can't imagine it would be too hard? Some sort of resolution? (Will check Trust Deed). Confirm the trust allows the add/change of trustee structure.

Cheers

It is very difficult to change a trustee. Firstly you will need legal advice, from a lawyer. What are the taxation and stamp duty consequences. You will need a deed of amendment done. You will then need to change title on all properties owned by the trustee - legal title will need to change. This includes all bank accounts as well. Any existing loans the trustee has will also need to be redone or the bank approval given.

Also read the deed. Changing trustees could result in a large change in the beneficiaries of the trust - hence the tax and stamp duty consequences.

Consider the effects on control of the trust. Trustees must act unanimously. What if there are disagreements.

What happens on death of one trustee? (beside changing titles again!) what about the control of the trust.

who has the power to change the trustees? Possibly the appointor. Have to make sure the trust deed is followed to the letter otherwise the appointment may be invalid.

These are other reasons why you should appoint a company as trustee.
 
PT, so I could create a company, of which wife and I are directors, then replace myself as Trustee with the company? Would this trigger Stamp Duty on properties owned by the Trust?

Thanks,

Just change to corporate trustee......it will save you all the hassle later on. Add wife and yourself as directors/guarantors, done. Terry has summed it up pretty succinctly. Asset protection is still valid with a personal trustee BUT the main issue is that it can be hard to separate the trust assets with the trustee's personal assets (as they are both in the same 'legal' name). If equitable tracing fails then it compromises the trust assets.
 
Unfortunately it's not mate, but I will research the transfer. I seem to recall a few other posts on this so I will follow it up. I've always wanted to have a company so I can call myself "executive general manager" **** **** :)

Cheers
 
Not true!

Property held by someone as trustee is not property that would fall into the hands the trustee in bankruptcy if that trustee went bankrupt.

However, if the trust is sued the personal assets of the trustee are exposed and therefore at risk.

The advice I've received wasn't in the form of bankruptcy related issues, more around asset protection.

Essentially I was told that if the trustee, beneficiaries and appointors are all the same people, it makes it very easy to assume the trust doesn't really exist. Using a corporate trustee gives an additional layer to demonstrate the trust is a separate entity.
 
The advice I've received wasn't in the form of bankruptcy related issues, more around asset protection.

Essentially I was told that if the trustee, beneficiaries and appointors are all the same people, it makes it very easy to assume the trust doesn't really exist. Using a corporate trustee gives an additional layer to demonstrate the trust is a separate entity.

Asset protection is about protection of assets in bankruptcy.

If the trustee and the beneficiaries were the same person there would be no trust in existance. Even if the beneficiary was one of many it is still a valid trust and still strong asset protection. I know of no case law which a validly formed trust was said not to really exist. This line of argument was tried in a NSW Supreme Court case in Smith - and failed.
 
All, thankyou again for your excellent advice, I will research the changing of trustee in this case but it looks like I might have to just see the two projects I have in *** Trust 3 with me as Trustee, then create Coy1 ATF *** Trust 4 for the next ones.

I assume it will be a much easier process once I sell all properties owned by the trust, leaving essentially a couple of bank accounts and no titles etc.

Hopefully the bank will not force me to add wifey as trustee on this occasion.

I am a bit disappointed with my accountant, as I may have mentioned, as they were more than happy to set me up as the trustee for my existing trusts, knowing full well what I was doing in them. I know they aren't solicitors, but it is a concern that they can set these things up for you without you getting a full understanding of the whole picture.

Thanks again!
 
ps I hope everyone understood the Executive General Manager comment was tongue in cheek. I wrote in wa*k w*nk but it was starred out :)
 
ps I hope everyone understood the Executive General Manager comment was tongue in cheek. I wrote in wa*k w*nk but it was starred out :)

It seems a waste if time for Cba to require this! If she is a named beneficiary and guarantor for the loan what's the bloody issue. I would be pushing back hard as CBA are generally ok with the spousal "joint loan just one on title" scenarios so can't see why they would ask for this.

Is she not a named beneficiary? Ie does the deed say wife instead of her actual name?
 
All, thankyou again for your excellent advice, I will research the changing of trustee in this case but it looks like I might have to just see the two projects I have in *** Trust 3 with me as Trustee, then create Coy1 ATF *** Trust 4 for the next ones.

I assume it will be a much easier process once I sell all properties owned by the trust, leaving essentially a couple of bank accounts and no titles etc.

Hopefully the bank will not force me to add wifey as trustee on this occasion.

I am a bit disappointed with my accountant, as I may have mentioned, as they were more than happy to set me up as the trustee for my existing trusts, knowing full well what I was doing in them. I know they aren't solicitors, but it is a concern that they can set these things up for you without you getting a full understanding of the whole picture.

Thanks again!

If the trust doesn't hold any real property then changing trustees should be easy and there would generally be no CGT or Stamp duty issues.

Don't let a bank dictate the management of a trust to you as existing trustee - you might even be breaching your duties if you do.

It is a concern about your accountant.
 
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