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Example HDT Deed

Discussion in 'Accounting, Tax & Legal' started by salocker, 28th Jun, 2006.

  1. salocker

    salocker Member

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    There is so much talk about HDT's and the benefits associated with the structure. I'm sure there are plenty of members within this forum who would like to take the next steps in establishing the HDT.

    I am amongst this category and as part of my due diligence I would love to be able to review a HDT Deed. With this in mind are there any forum members happy to attach their HDT Deed for us to review? Obviously sanitise the paperwork where required before posting on the forum.

    Thanks in advance
    Salocker
     
  2. TryHard

    TryHard Well-Known Member

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    Hi salocker

    I would mate, but in my case I see my Trust Deed as the intellectual property of NickM.

    What I would suggest, is that a HDT means nothing unless its produced by an expert and is relevant to your specific needs. Reading someone else's could confuse and/or damage innocent bystanders.

    My reason for setting up a HDT with NickM is I was had previously had a Deed prepared by a recognised trust 'expert' who supplied me with a Trust Deed that contained some significant inconsistencies (not at all discernible to your average person). NickM saved my bacon.

    Once you have determined you NEED a HDT for the advantages it provides, I honestly think its best just to bite the bullet and engage NickM and get it done. The contents are not as important as the results ;-)

    Cheers
    Carl
     
  3. salocker

    salocker Member

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    Cheers Carl - I agree 100% that an expert should set-up the structure. I'm just curious how they are set out and obviously the content within.

    Carl in your mind what key points should we consider when setting up the HDT strucutre? Also, if you are ok to share your experience, what were the traps you encoumtered with your origianl trust set-up?

    Thanks
    Salocker
     
  4. Nigel Ward

    Nigel Ward Team InvestEd

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    Hi Sal

    One of the many articles/papers/talks in on our "future content backburner" :D is to go through the "anatomy of a trust" and how trusts, and in particular hybrid trusts, work, with examples and diagrams...

    Pending that, I'd get a copy of Dale Gatherum-Goss' book "Trust Magic". It's very good!

    Is this something ppl other than Sal would be interested in ?

    Cheers
    N.
     
  5. pete152

    pete152 New Member

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    Yes I would be very interested as well. To learn a lot more about them.
    Cheers,
    Peter
     
  6. TryHard

    TryHard Well-Known Member

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    Hi mate

    I guess if you've identified the benefits of having a HDT (asset protection, flexibility, ability to negative gear, plan with the end in mind etc), the next step is to find the Deed / structure that will do the job for you.

    The contents are your typical legal jargon and the only important bit is for your adviser to identify the Deed terms legally allow you to achieve what you're setting out to do.

    I can't expand on what was wrong with my original set up, as I'd have to name the other firm involved, suffice to say I think NickM is the bloke to talk to if you want to do it right the first time. Plus reading anything Nigel says ;-) - I too look forward to the article on Trusts - I could have it explained to me 100 ways and still pick up something new each time :p

    Cheers :)
    Carl
     
  7. Redwing

    Redwing Well-Known Member

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    Me too,

    I always find anything on Trusts to be an interesting read, the maintenance and reporting requirements would be especially important around this time of year.

    Redwing
     
  8. -T-

    -T- Well-Known Member

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    I asked the accountant a week ago what was needed for year end and he basically said run a GST summary, then add any extras (from adjustments) to the June BAS and then send the file to him. I'm hoping that keeping the books clean and organised during the year will make it this simple.

    I have a hybrid trust that owns units in a unit trust, so two lots of reporting. I keep all equities investments in the hybrid trust and all property in the unit trust. I'm not sure if that's ideal, but that's how it is.

    I'll post back here once all reporting has gone through and let you know what complexities I run into.
     
  9. salsa

    salsa Well-Known Member

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    Who 's on the list of principal beneficiaries

    Hi,
    For thoese members who have used HDT, may I ask when you had the deed created, did you actually include your children name on the list of principal beneficiaries ?
    ta
     
  10. Nigel Ward

    Nigel Ward Team InvestEd

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    Whilst there's no harm in doing so, usually the drafting includes them by referring to the "children of Salsa". BUT make sure the generic wording is also included if you do specifically name...just in case there's any more little Salsa's on the way!

    Cheers
    N.
     
  11. pjb89

    pjb89 Active Member

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    Hiya all

    Just be careful who you name on your HDT as this can impact the ease with which you obtain finance from certain lenders.

    In our case, we thought that by naming specific beneficiaries that we were particularly close with (relations) was the right thing to do....WRONG!! We have had to battle with our lender on each occasion when obtianing finance as they wanted a stat dec signed by each named beneficiary. Regretably we have had a parting of the way with one or two of our closest relations and means that obtaining signatures our future loans unrealistic (to say the least).

    So we enlisted NickM to review the HDT documentation and remove the named benficiaries from the HDT without impacting its function etc. Now we are looking forward to taking our revised HDT for a test drive (new loan) knowing that we won't have to go through the previous dramas of pressuring the lender into not needing their signatures. Rolf L must be applauded for his previous efforts in assiting us to date also.

    The only advise that I can provide is that you don't need to specifically name the relations as these should already be referenced in the HDT documentation.

    Pedro
     
  12. Nigel Ward

    Nigel Ward Team InvestEd

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    Yeah PJB has raised a common issue encountered with discretionary trusts (and hence with the discretionary component of a HDT) where lenders require covenants from and sometimes guarantees from all adult beneficiaries.

    A request to resist strongly for obvious reasons.

    Cheers
    N.
     
  13. salsa

    salsa Well-Known Member

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    Thank you, Nigel and pjb.
     
  14. NickM

    NickM Co-founder Staff Member

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    PJB is spot on. We had another case a year or so ago when a client had listed his 4 children as Principal beneficiaries. Lender got nervous and we removed them.
    Since then he has not had a problem.
    PJB just ensure you produce all the relevant docs when applying for the loan. Rolf will keep you on the ball 4 sure !
    Nickm
     
  15. wasabiM

    wasabiM New Member

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  16. NickM

    NickM Co-founder Staff Member

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    Unfortunately MGS do not like to publish their deeds for viewing.

    I have a copy in my boardroom and clients are welcome to sit in and peruse the deed for as long as the like.

    I had one instance where a client insisted on his solicitor reviewing the deed, and MGS sent the deed directly to the lawyer.

    As i say to all clients, not all deeds ( and that includes smsf's) are the same. Particularly with HDT's you ahve to make sure it can do what you want it to do. The cheapest is not always the best.

    Eg, I use SMSF specialists to set up our clients SMSF deeds. whilst it may be cheaper to use others, i cant see the sense in trying to saving a few hundred dollars when this entity will be around for a very long time.

    Cheers
    NIck
     
  17. Nigel Ward

    Nigel Ward Team InvestEd

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    Nick is absolutely right. Not all trust deeds are created equal.

    I see lots of different trust deeds. Some are great, others are totally inadequate and often out of date.

    Bear in mind that what a trustee can and can't do is 99% governed by what is in (or is missing from) the trust deed.

    Cheers
    N.
     
  18. wasabiM

    wasabiM New Member

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    Nigel and Nick,

    I'm not advocating the use of either of the online trusts above. As someone new to asset structures though, I found it useful to see under the hood of a couple, as they were at least illustrative of some of the concepts and their basic structure. I would suggest that it would be foolhardy for anyone without the appropriate experience and knowledge to make an assessment of any particular trust, without first seeking the appropriate advice and conducting their own due dilligence.

    Personally, I've been spending the past month or so trying to absorb as much as I can so I can make the most knowledgeable decision on what it is I am likely to require, and then who the best person would be to advise about my situation and ratify my research. In my view, this sort of thing is too important for me to blindly trust a random advisor I pull out of yellowpages, so the more knowledge and exposure I can get prior, the better. Likewise the recommendations of those who are well regarded here, and the advice they dispense goes far in my choice of who I will give my business to. Finding these forums has been like a goldmine, and you’ll likely see a few more question posts from me in future.

    Chris
     
  19. DaveA

    DaveA Well-Known Member

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    i know it was brought up on the previous page and people may not want to devolge there information, but how does tax time work for trusts, do you just tally up all income, all deducatble expenses take the profit divide it by the number on units and that is your disrobution per unit (for hybrid trusts with a personal loan attached)... any tips or tricks or its a lot more simplier than personal incomes??
     
  20. iiinvestor

    iiinvestor Well-Known Member

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    Dave:

    I'm not sure about others, but mine seems more complex than a personal return. My accountant has created loan accounts between my trusts and the beneficiaries who own special income units. If you're an accountant, I'm sure it would be much easier.

    Also, any sales/repurchasing of special income units (when you put money into the HDT or the HDT buys back the units) requires paperwork. I'm sure it's easy, but it just makes it different from a personal return in my opinion.

    I'd prefer to do it myself too and just have an accountant look over my work.