A few years ago I mentioned to a friend that I had life and trauma insurances, his reply was why waste your money on that. Now he has a few months to live with sudden discovery of advanced cancer which has spread to his organs.

My insurance cost me less than $200 per month for both life and trauma.

I don't think so. What does your accountant say?

They are not owners of the property, so leave that aside for the moment. If they are borrowing to invest they could claim the interest, but what your parents have done is to borrow to relend. If they are getting a loss with no prospect of a profit then it is not a commercial transaction. ie it is not done with the intent to profit.

And how can they claim the interest?

I think the original post is about setting up a trust – I assumed a discretionary trust. If it is a SMSF trust then it is even more complicated and more important to get advice.

The deed is only one aspect of the trust. It is how it is set up that is important. eg.there are cases where someone bought a property as trustee for a trust and then they were charged stamp duty twice because the trust wasn't settled properly before hand. That would be a very costly mistake. What about if you put a family member as settlor – then later find out that that person can never receive a benefit from the trust – I have seen one of my old clients with his trust set up this way. Or you name uncle X as beneficiary and then can't get finance because he refuses to give the bank a personal guarantee and the bank won't lend without it. Taking off would probably result in a resettlement with full CGT and stamp duty payable on all the trust assets.

Injecting cash means you can keep the properties stand along. Using as security means cross collateralising. There can be differences in this regard.

Borrowing capacity is not helped by the trust – actually it may even be hindered as your income will drop, but the lenders usually just go on the rent received by the trust and your wages so it is usually ok.

You can't say the trust is just for security. A trust is a special relationship where the trustee owns something for the benefit of others. The trust assets don't belong to the trustee and he/she/it cannot treat them as its own. So there are strict legal obligations on trustees to run the trust with the best interests of all the beneficiaries. You have to be careful to make sure your trust is not an artificial scheme.

The trustee of the trust is the legal owner of its assets. All legal documents will be in the trustee's name, so what will happen is the title will be in the name of the company and the loan will be in the name of the company or the company as trustee of XX trust. Since the trust and the company have no real substance, any lender will need personal guarantees from real people. Usually they want the director of the trustee to guarantee the loan, but many banks also want more than this and ask for any shareholder's of the trustee to give guarantees and maybe any named beneficiaries in the trust deed (adults only). This is not ideal because some people name relatives in the deed and these evil banks will not proceed until that relative gives a guarantee – and they may know nothing about the trust.

Even once the trust is established the guarantees will still be required. It is only in some non -recourse type loans which they will not be, and these are only for the big stuff.

Anyway, to kick things off if you borrow money you can on lend to the trust, or you can let the trust use your personal property as additional security to borrow the full amount of the purchase. If you lend to your trust the money will remain your's and will be your asset and the trust's liability.

When the trust buys a second property you may be able to use equity in the first one or inject more cash into it. (you will also need to keep injecting cash to fund any shortfalls). You will also need to give a guarantee and the bank will assess you on your incomes and all loans and guarantees. Using a trust provides no advantage in this regard.

It could be the trustee or a beneficiary. The directors can also be separate beneficiaries.

The bank will have to do their own valuation – maybe they just wanted you to get an estimate so you have something to work on. No use in submitting a loan if your valuation will come in way lower than expected.

I think you should probably try your luck with asking the agent for compensation. If they refuse then not sure what else you could do.

I have just seen a case where the purchaser had arranged to move in on settlement day, but the tenant had not moved out, and refused to move out because they hadn't found somewhere to move into. They are being taken to the tribunal, but it could be weeks before they are able to be kicked out.

Yes, if the trust pays interest to the Whites, then it is income to them, and an expense to the trust.