Borrowing which name to use: Trust or ATF?

Hi
I hoping someone can help me with this, Ive completed a search for the answer but couldnt find a post with the exact info I was looking for so here goes.

I have a Family Discretionary trust (not HDT) I want to borrow money to purchase a property to be held by the trust, do I

1) use my name only on the bank application? or use my name ATF xxfamily trust?

If I use my name only on the application and the Title is in ATF will this create tax issues later on?

2) Should all other legal documents should be signed as Wazza ATF xxx family trust?



I appreciate any advice
 
If you are the trustee, then I don't think it matters.

The loan can be in your name or the trust's name. If in your name, you will be doing it as trustee for the trust anyway, so its the same thing.
 
Hiya

As Trustee, you are borrowing not in your own right, but on behalf of the trust, so id say Joe Bloggs ATF ,,,,,,,,,

While on the sirface this is the samething, it is indeed not. The trust allows the trustee certain things he/she cant do as a natural person, and also limits some things you can do as a natural person.

The lender will be very interested that you are borrowing as a Trustee and will want to see the trust deed.

ta

rolf
 
Thanks for the replies, bank and conveyancer were telling me to put the loan app in my name and sign the contract for sale as ATF. Im nervous enough so this just sent me into panic on friday.
 
bank and conveyancer were telling me to put the loan app in my name and sign the contract for sale as ATF

Sounds to me like they might be thinking this is a HYBRID Trust !!! I'd want clarification before doing a thing!!! How's your solicitor?? A full bottle on Trusts, I hope...

Regards,
 
Howdy

Bank is NAB

I set up my trust with Nickm I rang the office today and I was told same thing -
loan application in my name and sign contract 4 sale as ATF.
I asked when given this advice - is this the same for a disc trust? i was told made no difference.

I understand this would be ok for a HDT because I borrow the money and get units in the trust but I wasnt sure for a standard family Disc trust.

I will try to ring NickM directly tomorrow to clarify.
 
G'day Waz,

NickM would KNOW!!! I'm only guessing, but it sounded strange to this untrained mind (I have an HDT, but NOT a discretionary trust). And that is what I did with the HDT - I really thought it would've been different for a Disc trust.

Anyway, do let us know how it goes - obviously I can do with learning more in this area ;)

Regards,
 
Hey Waz!

I'm in the process of getting a HDT setup through Nick.. From recollection, he said the loan application should be under my name only, but the contract for sale would be as trustee for the HDT (I've read otherwise on older forum posts though!). Appears to be consistent with the advice he gave you.

I assume this means that I'd be lending the money interest free to the HDT, and this just needs to be captured (ie. recording what the trust does)

I'm waiting for confirmation, so will let you know know what his response is.

Rgds,
Hieu
 
Hiya

The borrower for a HDT is most often the individual with the trustee as guarantor.

With a normal DT, the borrower is most often the trustee.

The difference is that the HDT needs personal borrowng for the tax benefit to work

ta

rolf
 
Well I had some very good advice today which was what I originally thought - Discretionary Family trust, loan should be as ATF. HDT loan app should be in your name only.

Rolf you have been consistent on this point, I'll see how it goes and let you all know thanks for the responses.
 
Take Note

Wazza

Its good that you got the answer you needed. If you get the loan in YOUR name, then you have two choices as to how you get it to your trust, none of which are much good.

Firstly, you can gift the money to your trust. If you do this, you will get NO tax benefits from the interest. The bank lent you the money but you didnt buy a property, and gave it to the trust instead. The trust can't claim interest either, because it isnt paying any. The money was a gift.

Secondly, you can lend the money to the trust. It can pay you interest, which it can claim, but you have got no asset protection, since the loan can easily be clawed back in the event of you being sued.

You should get the loan as Wazza ATF xxx trust and do everything this way. Using Wazza for this work wont work because you're not doing it, the trust is. Using the trust's name wont work because the trust (technically) can't do things like borrow money or buy property (but someone or some entity can do it on its behalf ie ATF) and a company wont work either, because you will end up with the property in the name of a trustee company (if you use one) and not in the actual trust.

I really think you need to get a better broker. The banks and brokers find it easier to tell you what is simplest for them to do and understand. When you're dealing with trusts and taxation, you've got to be using people who really understand what is happening and it seems you aren't.

Tubs
 
Thanks Tubs

the loan was a little problematic and I did get some great advice from a couple of brokers on this site who were very helpful.

Ive been trying to get this sorted for 4 months now, mainly Ive been the cause of the problem - not financial, just not being decisive and over analysing.

Your explanation is very clear and helpful, thanks for the response.
 
You set up a HDT because you want to take advantage of the gearing for the high income earner - for this reason, the loan should be in the name of that high income earner (who buys the units in the trust, and claims interest expense from the loan). If the loan is in the name of the trust, then the individual cannot take advantage of the gearing. The property should be in the name of the trustee company (in NSW, my solicitor said only the name of the trustee company is recognised on the title, not "trustee company ATF family trust"). The bank should be able to lend the individual the money, but it will ask for a guarantee from the trustee company and will hold the title of the property as a security.
 
Trusts

I should have specified that my post was on discretionary/family trusts which is what Wazza's query was about.

Tubs
 
babushka said:
(in NSW, my solicitor said only the name of the trustee company is recognised on the title, not "trustee company ATF family trust").
I understand one of the things we set up our Trust for is Asset Protection, and that is achieved by having a corporate (Pty Ltd) trustee, who is sacked by the Appointor if the Trust is ever sued, with a new Pty Ltd co. then appointed. So if it is ABC Pty Ltd ATF The Trust, and we sack them and appoint "XYZ Pty Ltd" as the new trustee, what happens on the title, which would still say "ABC Pty Ltd" ?? Would that mean Stamp Duty payable because the name on the title would have to be changed to XYZ Pty Ltd.

The more I learn about Trusts, the less I understand :)

Cheers
Tryhard
 
An attempt at an answer

Hi Tryhard

I'll give it my best shot, but others are free to comment/correct/bag the hell out of it.

My understanding is that although the name of the company may be the only thing on the title, the ownership is still in the name of the trust because this is what is on the contract of sale. So in the event of you being sued, they will see the title and think 'Good', but then they will see the contract of sale and be disappointed.

I'm not sure why you would need to appoint a new trustee company, as it may be too late if legal proceedings are underway. They could probably just unwind it. However, if you own the trustee company, the trustee company doesnt own anything. All it does is make decisions on behalf of the beneficiaries. Having said that, if it were being sued it would probably be a good idea to move it away from the trust just in case, so another trustee company can get on with the job of managing the trust.

I don't believe any stamp duty would be payable, since the property is still owned in the trust. The trustee company acted on its behalf to do it (ATF).

Tubs
 
Great Tubs Ta

Thanks heaps Tubs

That made sense, even to me :eek:

I love the concept of the mixed emotions of the litigious types thinking "good" then getting the "d'oh" feeling :p

Of course hopefully I will never do anything to cause someone to sue (or if I was in the US, NOT do anything to cause someone to sue anyway)
 
Back
Top