Use inheritance to pay down investment loan

[Toni]

Hi all,

I'm considering paying down an investment loan ($220,000) by using some of my inheritance. I am considering paying off $180,000 of it, leaving a balance of $40,000 owing. We would still have two others that would owe us in total $590,000 and PPOR would be fully paid.

Really am just concerned if this is the right way of doing it. I was hoping I could then transfer ownership of this investment property into my name, so the rental earnings would be in my name, but the debt of the other properties would remain in my husband's name.

Really would like some advice.

Toni

 

[Rolf Latham]

Hi Toni

As a generality id not recommend you pay down IP debt directly, but if at all possible, retain tax paid earnings in an offset account, which if properly set uo, should have the same cashflow result as paying down the loan, but goves you more flex with the cash.

Im not an accountant though..........so pls seek specific advice

ta

rolf

 

[Dazz]

I'd only pay down the NTDD (non-tax deductable debt) on your PPoR if you have any.


The remainder of the cash could easily be used to purchase something like Big Bank shares paying fully franked dividends, which would balance up the other IPs you have. Sounds like they need to go into your name.


*** Disclaimer : I'm not an accountant - thank the Lord.

 

[Terry_w]

Probably not a good idea to do it like that.

For a start whose name is the property in if it is not your's.

Then look at the tax and asset protection issues.

I'd be gifting the money to a discretionary trust and then borrowing it back. But you might want to get advice on post death testamentary trusts (may not apply depending on the circumstances).

 

[Toni]

Thanks for all your comments, but I probably should explain the reasons why I was considering doing this. All investment properties, (including this one) are in my husband name, as I have not worked. We have been asset rich, but cash flow poor and with two special needs children, working has not been an option.

I'm looking more for quality of life. Losing my mum was a little reality check for me.

Toni

 

[Terry_w]

Thanks for all your comments, but I probably should explain the reasons why I was considering doing this. All investment properties, (including this one) are in my husband name, as I have not worked. We have been asset rich, but cash flow poor and with two special needs children, working has not been an option.

I'm looking more for quality of life. Losing my mum was a little reality check for me.

Toni

I think you need to get some legal and financial advice as there are a few possibilities which could improve your plan.

And I should add it is a good thing in general to pay down debt

 

[Toni]

Thanks terry, will do. Does anyone know anyone good around this area?

Toni

 

[Mr. Fabulous]

James at House of Wealth. He's not good, he's fan-tiddly-astic! He's my accountant and I live in Brisbane. Great bloke all around as well.

www.houseofwealth.com.au

 

[Toni]

Thanks Mr Fabulous, I've sent an email to this company requesting a time to sit and discuss our situation in greater detail.

Toni