Loans in relation to Hybrid Disc Trust

[Kevmeister]

If we have a Hybrid Discretionary Trust that we wish to apply negative gearing to, then obviously the units should be held by the highest income earner to get the greatest tax benefit. Correct?

On the other hand, from the banks perspective they will probably require the husband/wife to jointly sign the loan contract.

So my question is - do the units purchased within the Hybrid Disc Trust have to be in joint names because the loan is in joint names?

I can't imagine this to be the case, but I guess the issue is a little cloudy because of the trust structure, the security involved, and the guarantees that must be made to the bank.

 

[Rolf Latham]

Hiya Kev

Loan to be in the highest income earners name.

Commercial Guaramtee given by Mrs and Trustee Company

Easy - most times,,,,

ta

rolf

 

[Reeg]

G'Day Kev,

I have just been through this process and it was pretty much as Rolf has said.

Property purchased by ABC Company of which myself and my wife are directors. Loan was in my name only with property put up as security. Both my wife and I as directors had to sign guarantee forms. That was essentially it. Oh and with the loan for $x I purchase x units in the trust which is used to buy the property.

It was all pretty easy.

Cheers,

Richard.

 

[D.T.]

Hi Reeg / everyone,

Just a Q... if you and your wife have signed person guarantees and something bad happens, doesnt that mean creditors can come after you? I had thought that the purpose of getting a company / trust was to keep your own name well away from it for this reason.

-Regards

Dave

 

[Kris Sheather]

The trust is there for asset protection, against unknown parties, and to distribute income in a tax effective fashion.

If you were in the banks position, would you lend to a trust, without having a guarantee from the directors of that trust? I know I wouldnt.

 

[Reeg]

G'Day Dave,

My thoughts were pretty much the same as Kris's. The bank has in an interest in the house that is all. Personally I don't own it but I have a liability. If a creditor comes after me I can't offer them much. But the bank is a different story because they are not really a third party - after all they have an interest in 80% of my house. If the loan is defaulted what's the difference whether the loan is to me personally or to the trust?

Cheers,

Richard.