Divorce Solicitor/Finance

[josko]

And No It's not me! &*^*%&$

My very dear friend is going through the most horrible divorce atm.

Her husband has been just unapproachable and completely nasty, to a point where he sacked his own Solicitor and now my friend's solicitor will not deal with her ex.

(We'll call her) Kelly and her ex have an IP property in a trust. Ex won't sell the property and therefore Centrelink are regarding the rent as income, as we all know...Kelly can't get any assistance from Centrelink based on the fact that her rent in deemed as income.

Of course she must have her ex agree to buy her share of the trust....which he is refusing to do. (He also know's she can't get a loan while her name is attached to the property).

She has been advised by her Solicitor that her Ex is trying to get every cent that she has left wasted on a Solicitor and court fees. Her Solicitor also advised her to give up her badly paid job. What amess!


Any ideas?

Regards JO

 

[Aaron_C]

Who is the director of the trust? Is there a clause in there which deals with how the property should be managed?

 

[josko]

Thanks Aaron, I'll find out.

Regards JO

 

[Aaron_C]

Yeah check the trust deed for the control of the trust to break the deadlock. A good lawyer should have done that.

 

[lizzie]

Also, how much money is involved? Is it financially worth the angst and stress if an insubstainal amount (after lawyers fees) or will it set up for for the remainder of her life?

Sometimes it's best just to let go and start afresh.

 

[Rolf Latham]

appointor : )

ta
rolf

 

[josko]

Thanks Lizzie,

No, the IP is currently worth nothing. They would sell at a loss.

She just wants her name off the trust so that she can get some benefits to support her two children and perhaps buy another home one day. He's quite vindictive, so for him it's a matter of making her life hell.

Centrelink is using last years tax return based on his income of approx $50,000 less due to 3 x NG properties. She managed to sell two while he was still amicable but he won't sell this last one.

Her Solicitor knows she can't afford court and has really done her a favor by refusing to deal with her husband...I think.

Regards JO

 

[skater]

Like Rolf said, find out who the appointer is. They really control the Trust.

Also, as it's a trust, how does Centrelink have anything to do with this. It is an entirely different entity to herself personally. The only thing Centrelink need to know is if she gets distribuitions from the Trust, surely?

 

[Aaron_C]

Like Rolf said, find out who the appointer is. They really control the Trust.

Also, as it's a trust, how does Centrelink have anything to do with this. It is an entirely different entity to herself personally. The only thing Centrelink need to know is if she gets distribuitions from the Trust, surely?

well obviously if she is a beneficiary she is eligible for distributions. Given that most property trusts are fixed unit trusts, she has to receive distributions and therefore rental income...

 

[skater]

well obviously if she is a beneficiary she is eligible for distributions. Given that most property trusts are fixed unit trusts, she has to receive distributions and therefore rental income...

No. It could very easily be negatively geared.

 

[Aaron_C]

No. It could very easily be negatively geared.

??? Trusts can't distribute losses. She's still getting income even if overall it is a negative gearing exercise.

 

[skater]

??? Trusts can't distribute losses. .

Exactly my point.

 

[Aaron_C]

Exactly my point.

Do you know how a fixed trust works to achieve negative gearing?

 

[skater]

Yes I do.

Perhaps I didn't explain myself very clearly. If the Trust is not making a profit, then she does not receive a distribution. If she is not receiving a distribution, do Centrelink even need to know of the existence of the Trust. Also, if they DO need to know about it, then why does she have to declare the whole rental income? Surely she should only have to declare what the amount of her distribution is.

 

[lizzie]

ah - is it a discretionary trust where the mortgage is held within the trust and hence the possibility of no distribution or negative gearing against other income.

... or a hybrid discrentionary trust where the mortgage is held outside the trust and hence the distribution is positive (rent less management fees/body corporate/maintenance) until the mortgage - possibly only in husbands name - is applied on the outside and negative gearing can be balanced against other income.

Did that make sense

 

[Aaron_C]

Yes I do.

Perhaps I didn't explain myself very clearly. If the Trust is not making a profit, then she does not receive a distribution. If she is not receiving a distribution, do Centrelink even need to know of the existence of the Trust. Also, if they DO need to know about it, then why does she have to declare the whole rental income? Surely she should only have to declare what the amount of her distribution is.

What are you talking about? You obviously don't know how property trusts work...

The trust will receive rental income, and then distribute that to its unitholders. The unitholders (i.e. the husband and wife) will pay interest on the borrowings they used to purchase units in the trust. If the interest is more than the rental income, then they are negative gearing.

 

[skater]

What are you talking about? .

Unit Trusts are not the only kind of Trusts.

Read Lizzies above post.

 

[Aaron_C]

Unit Trusts are not the only kind of Trusts.

Read Lizzies above post.

How can you negative gear a discretionary trust? Don't make things up. The ATO only allows negative gearing using a trust structure if it fits their strict criteria about who is entitled to income and capital gains.

 

[josko]

Easy there Aaron!

The trust would be a Hybrid Discretionary trust. It allows the unit holder/s to distribute the loss on interest payments to either.

lizzie:

... or a hybrid discrentionary trust where the mortgage is held outside the trust and hence the distribution is positive (rent less management fees/body corporate/maintenance) until the mortgage - possibly only in husbands name - is applied on the outside and negative gearing can be balanced against other income.

Did that make sense

YES!

BTW Rolf, almost certain Kelly and ex are both appointers but wouldn't it be nice if I was wrong....

Regards JO

 

[Aaron_C]

Easy there Aaron!

The trust would be a Hybrid Discretionary trust. It allows the unit holder/s to distribute the loss on interest payments to either.

The ATO does not like Hybrid Trusts because it, more often than not, comes under surveillance for Part IVA. A fixed unit trust does not have this problem.