Difference between Hybrid UNIT trust & Hybrid DISCRETIONARY trust

[aok]

Hi,

I have not been successful in my search on this forum for an explanation of the difference between a hybrid UNIT & a hybrid DISCRETIONARY trust. Can someone please kindly elaborate on the differences (if any).

Under what circumstances would you use the hybrid unit or discretionary trust.

Thank you for your time.
Tracy

 

[Les]

G'day Tracy,

I am quite prepared to be wrong, as I am certainly not overly knowledgeable in this arena. However, my take on it is that a "Hybrid" Trust is a conglomerate of a Discretionary and a Unit Trust.

If a "Hybrid Unit Trust" is an accepted name, then this might be just the "Unit" part of a Hybrid Trust (and the same for the Discretionary part?) Could this be right? I don't know for sure.....

Please don't take any of this as gospel - I'm hoping someone with a bit more knowledge might step in to put me right. Can't hurt to understand a bit more as I do have a Hybrid Trust (relatively newly formed).

You there, Dale, Nick, anybody????

Regards,

 

[NickM]

Hi Tracy

I will try and provide a simple explanation

A Hybrid Disc trust is where it is effectively a discretionary trust with the ability to issue units.

A Hybrid Unit Trust is a unit trust with the ability to distribute income with discretion.

A HDT is suitable for negative geared property investments as the deeds that Dale and I use specifically state that the unit holder must receive income that is generated from the units that were purchased.

On the other hand a HUT states that the unit holder receives the income then the unit holder has a class of beneficiaries to whom they can distribute. There is no strict requirement to distribute to any one person.
This is where i believe a HUT fails in not enabling an individual to negative gear their units.

A HUT would be suitable in a business where there are 2 or more parties involved. It could act as a substitute for say a standard unit trust structure where the units are owned by 2 discretionary trusts.

I hope this clarifies the difference for you.
regards
Nick