All Topics / Legal & Accounting / Using a Trust to Use Equity of PPOR

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  • Profile photo of muzzwoldmuzzwold
    Join Date: 2004
    Post Count: 4

    First post!

    Parents have $1million home with no debt.

    They also have an investment property worth $300,000 which is inside a family discretionary trust.

    They are in their late 80’s so perhaps another several years before they pass on. They are surviving ok on a form of superannuation.

    I’m trying to solve a few issues, not sure how to go about it.

    1. Is there a way to unlock the equity in the PPOR for the trust to buy additional cashflow positive properties? I know an extra trust could be setup to place a mortgage on the PPOR and then lend(?) funds to the first trust with the existing investment property. But what would happen when the parents pass on? Would the mortgage have to be repaid through selling the newly acquired properties? Any other strategies here?

    2. Should the PPOR be willed into a new testamentary trust, or be placed into existing trust? Or is it worth gifting/selling property into the existing trust?

    Profile photo of TerrywTerryw
    Join Date: 2001
    Post Count: 16,213

    The trustee could borrow against their property. If they pass away the mortgage would probably need to be discharged so the trustee will need to either pay out the loan or find other security or other sources of funds to pay out the loan.

    2. never to an existing trust, consider a new testamentary discretionary trust in the will. Powers might include taking the mortgage of the existing trust over – i mean giving it a new mortgage.

    Selling or gifing to the existing trust is going to cost money in stamp duty. maybe not a good idea.

    You have to consider their capacity too – are they deciding all of this or are you?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide)

    Profile photo of muzzwoldmuzzwold
    Join Date: 2004
    Post Count: 4


    Trustee of existing trust could borrow against their property as a mortgage.

    I will need to get further advice on how the will(s)/testamentary trust could takeover the mortgage upon last parent’s passing. They key to taking it out will be the acceptance of the lender to the exit strategy.

    Also contingent on the borrowing capacity and the allowed LVR for such a deal.

    Thanks for your input, puts me on the right path to get further advice then present to parents for their approval.


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