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DT - margin loan, asset protection, 2 trusts

Discussion in 'Accounting, Tax & Legal' started by dkmc, 5th Aug, 2007.

  1. dkmc

    dkmc Well-Known Member

    24th Aug, 2005

    Ive been thinking hard on asset protection
    I have IP's and shares in personal name
    Im in a job where being sued is a possibility

    My current plan
    Establish a DT with company as trustee
    gift money to DT

    Because of the Richstar case - my lawyer has advised me not to be appointor, or director of the corporate trustee - to use a third party - eg mum - Lets not argue this - this is my legal advice for my situation

    However this poses problems with finance - getting a loan thru the trust - secured against property in my personal name - as they will want mum -the director to be guarantor, me to provide a personal guarantee, and a mortgage on property in the personal name

    I was thinking of initially gifting money to the DT to buy shares
    and getting a margin loan in the trust
    ***Are the criteria for getting a margin loan the same ?
    They can use the shares in the trust for security - that way theres no link to the property in my personal name
    ***Will the margin lenders require - a directors guarantee?
    will they just take a personal guarantee from me personally
    This will be an isolated protected trust - and will be +vely geared

    second part
    Borrow against increased equity in the properties in my personal name.
    Bank lends me money
    I lend the money to a 2nd DT
    It may buy shares, it may buy property
    Given this is all borrowed funds I may have myself as director - or joint with someone else
    to allow easier access to finance
    Later down the track when there is more equity - shift money to DT1 for asset protection - by selling shares
    With property - get money from DT 1 - to use as a deposit and borrow within the trust

    The 2 trust setup allows
    streaming - of profits from trust 1 - to trust 2 or any beneficiary

    Anyone else had experience with a 2 trust setup - one positive, one negative - and explain how it works / the advantages in more detail
  2. NickM

    NickM Co-founder Staff Member

    20th Jun, 2005
    in principle that seems ok as well except you will have to do a family trust election and interposed entity election if distributing between trusts.

    Understand your issues at option 1 but there may be another way around it if i had more info that would make the finance easier to obtain.