Trust question

[setunge]

I have setup a discretionary trust with the company as a trustree according to Dales manual.

Now I am in the process of acquring an investment property to the trust. Bank has approved my loan and I am in the process of going through the loan documents. I have been asked to sign a gurantee and indemnity which states it may become necessary for me to sell my all possessions( that means my other investment properties) so that I can pay back if something goes wrong.

The question that comes to my mind is, what is the advantage of using a trust if I am personally still liable for the borrowing. Is there a way out of this situation?

 

[DaleGG]

Hi

As Rolf will confirm, this sort of request is normal for the bank.

I have never worried about signing the indemnity myself given that your only exposure is to the bank and not to outside creditors who may wish to sue you. And, all of us intend to repay the bank's loan whether it be the P & I or the Interest only.

Have fun

Dale

 

[geoffw]

I've just had to do similar.

I wasn't sure in my case whether it was just because I couldn't get LMI on a block of flats- or whether the property was owned by a different entity than that which was providing the security for the property. I suspect it was both.

My understanding is that the indemnity is only for amounts which would be required if the trust defaulted and which could not be recovered by the bank selling the property- so even in the worst case, you would not have to sell up everything you own.

You probably had to get advice from a solicitor, whose duty was to give you the absolute worst case scenario.