BIG problem with settlement - lending agent RAMS

I set up a trust and from my lawyers advice I put my fiance' as a beneficiary.

I applied for a loan through RAMS. On my approval form it states that my fiance' has to sign as guarantor. This was not explained to me by RAMS or my broker. RAMS will not budge on my fiance not signing as guarantor.

Have spoken to another lawyer, he strongly advises for my fiance not sign as guarantor as she is responsible for the debt and also effects her borrowing capacity for future properties.

I thought the solution was for me to put the title in my own individual name. After seeking advice from both my conveyancers and me ringing state revenue with the 2 interstate properties (WA and Tas) I will have to pay double stamp duty on each property, even though the properties have not settled. This is going to leave me out of pocket $10-12k.

From what I've been told state revenue basically want as much cash as possible and will not listen to any excuse or "to be seen as avoid paying stamp duty"
Hey, I am no finance expert, but why would anyone lend YOU money on a property that they can't access (owned by a trust with other beneficiaries) in the event of default?

Of course they want your fiance's guarantee. They probably need it to register the mortgage.
All Adult Beneficiaries of a Trust must be a 'party' to the loan

This is so that there is clear evidence that they acknowledge that their interests ie the assets of the Trust, are being mortgaged

Otherwise, Adult Beneficiaries could later challenge that the Trustee had mortgaged the assets without their knowledge and consent and seek to revoke the mortgage

No doubt your lawyer, the one who gave you advice, went through all this with you when establishing the Trust

If you have made the decision to establish a Trust based on their 'advice' then perhaps your questions should be directed to them rather than blaming a lender to whom you have applied for a loan of money and to whom you have offered the opportunity to register a mortgage over the assets of the Trust.

By the sound of it, perhaps you have overstepped your Authority to Act as a Trustee of the Trust, and without the express permission of the Adult Beneficiary / Beneficiaries of the Trust, the deal will not be able to proceed.

Perhaps your lawyer can advise further but in as far as lenders are concerned why would they take a security when they would not have full permission to register a mortgage over that security?

All Adult Beneficiaries of a Trust must be a 'party' to the loan

I'm no expert but if it's a discretionary trust why not have her removed/taken off as a beneficiary, at least for the time being.

If its a unit trust it may not be do-able or as easy..

Thats one of my hobby horses.

Thats a funny one and it depends on the lender.

RAMS for one want all named benes to be either borrowers or captured as guarantors, but the Appointor gets off scott free :)

This just tells me that most lenders dont have a clue.

The core issue as to why the soli is saying dont do it isnt as obvious as it first seems.

Unless the named beneficiary is also a trustee OR a director of the trustee, the person is providing a 3rd party guarantee. That is they are providing a guarantee to a loan where they may nver derive a benefit. Remember the trustee decides who gets income and capital.............thats why its called a discretionary trust.

Now try this one the other way round.

Your mum wants to guarantee your loan on your PPOR. Most lenders wont have a bar of it, because unless mum is on title, she would be regarded as not deriving a benefit. Where is the difference ?

Im not a legal beagle, but have a major issue with the adult bene stuff, because where does it actually stop ? Most DT deeds have blood relatives, marriage relatives and related entities as beneficiaries.

In this case, there is a derived benefit through the relationship, and thus the famiky court would set aside any trust issues anyway.

Thanks for your reply, my original lawyer did not tell me this and is still telling me that the lender is at fault. He has 14 yrs experience and has setup 100's of trusts. I thought he would be ok.
Hiya R3

I dont believe your soli has much to answer for per se, although I find many accountants and solis arent aware of some of the special financing needs of their clients and would be well served to speak with the clients broker b4 committing to a structure.

Its not RAMS fault either per se. They can invoke whatever T&Cs they want, a guarantee from benes is just one.

Its a delicate balance here between borrower, lender, broker and solicitor id say, and a lack of clarity on the needs of the borrower, wherever that lack may stem from. Problem is, everyone ducks for cover :(

I recall every written approval I have had from RAMS they have usually asked for the guarantee at that stage, long b4 issuing docs.

If you are dealing with a broker without a lot of deals under the belt, this sort of thing can slip through, hand on heart, its the only way you can learn many times. This type of thing has caught me out as well in my early days, but you dont get stuck with it anymore, since my clients simply dont go unconditional until they had reviewed the conditions of the loan ( well at least the ones that follow our advice dont)

I'm no expert but if it's a discretionary trust why not have her removed/taken off as a beneficiary, at least for the time being.

If its a unit trust it may not be do-able or as easy..

I have looked into taken her off as beneficiary and spoken to Revenue WA and Tas. Without giving too much away they were hinting that it might be ok and I might not get hit for double stamp duty.

Has anyone heard of this being successful ? thanks
I don't think the lawyer is to blame. They cannot know the policies of the various lenders.

The easiest way out is to change lenders. Not many have this policy. St G for example may only require a letter from the adult beneficiaries stating they understand the trustee is borrowing to purchase.... and they are ok with it.

Removing a beneficiary will result in a resettlement of the trust. This occurs when a trust closes down and a new trust is formed with all the existing assets transferred. It can result in stamp duty and CGT. But if your trust doesn't have any assets, then maybe no issues. But you may need to pay stamp duty on the deed again. Talk to your lawyer about this one.

Another way maybe to not inform the lender the trustee is acting as a trustee - so they will not know a trust is involved. I believe this is legally possible, without any issues, but some lenders now ask questions on the app forms about acting as a trustee.