Using a Discretionary Trust

[ashwilkie01]

Hi all,

I have a number of questions regarding the use of discretionary trusts.

1) If the trust only borrows 80% of the IP value, will the bank need any guarantors?

2) Can the Trustee be a beneficiary as well? If so could the trustee distribute all income to themselves?

3) Any advice on obtaining finance for a discretionary trust, I.e which banks will happily lend/Structure of loans etc.

I currently own an IP and don't particularly want to sell it but would love to build a new home. Is it possible/advisable to sell the IP to a discretionary trust and use the funds to build a PPOR? I know there will be significant costs in doing so but think that they will be worth it in the long run.

I am currently the owner of the IP and would like if, the relationship between my partner and myself were to break down, I would continue to own the IP (Referring to Q2 above)

Am I thinking about this all the wrong way???

Thanks for your wisdom!

Regards,

Ash

 

[devank]

I currently own an IP and don't particularly want to sell it but would love to build a new home.

I'm sure Terry will answer your Trust questions.

Is it a 'Home' or 'House'? If it is going to be your 'Home' then why do you want to lose the CGT exemption by moving to a discretionary trust?

 

[Marty McDonald]

1) yes from the directors of the trustee company or from the personal trustees and possibly the beneficiaries as well.

2) If an individual yes. Not if a trustee company wouldn't think.

3) Depends!

 

[Aaron_C]

1) If the trust only borrows 80% of the IP value, will the bank need any guarantors?

Yes, of the directors (if a corporate trustee) or of the trustees themselves (if personal names)

2) Can the Trustee be a beneficiary as well? If so could the trustee distribute all income to themselves?

Yes it is possible. They can't be the only beneficiary though.

3) Any advice on obtaining finance for a discretionary trust, I.e which banks will happily lend/Structure of loans etc.

Any of them really....it isn't much different from a normal personal home loan except more paperwork.

I currently own an IP and don't particularly want to sell it but would love to build a new home. Is it possible/advisable to sell the IP to a discretionary trust and use the funds to build a PPOR? I know there will be significant costs in doing so but think that they will be worth it in the long run.

I doubt it would be worth it, but you have to work it out yourself. You will have to pay stamp duty and capital gains tax.

I am currently the owner of the IP and would like if, the relationship between my partner and myself were to break down, I would continue to own the IP (Referring to Q2 above)

You don't own it. The trustee does. If you control the trustee (being the only director, for instance), then you 'own' it for all intents and purposes.

 

[Terry_w]

Hi all,

I have a number of questions regarding the use of discretionary trusts.

1) If the trust only borrows 80% of the IP value, will the bank need any guarantors?

2) Can the Trustee be a beneficiary as well? If so could the trustee distribute all income to themselves?

3) Any advice on obtaining finance for a discretionary trust, I.e which banks will happily lend/Structure of loans etc.

I currently own an IP and don't particularly want to sell it but would love to build a new home. Is it possible/advisable to sell the IP to a discretionary trust and use the funds to build a PPOR? I know there will be significant costs in doing so but think that they will be worth it in the long run.

I am currently the owner of the IP and would like if, the relationship between my partner and myself were to break down, I would continue to own the IP (Referring to Q2 above)

Am I thinking about this all the wrong way???

Thanks for your wisdom!

Regards,

Ash

1. yes
2. yes, but the trustee shoudn't be a beneficiary
3. all
4. possible
5. Trust assets will be at risk on marriage breakdown.

 

[ashwilkie01]

Thanks for all your replies!

I will consider all of your advice

I'm sure I will have more simple questions in the future!

Thanks again,

Ash