How do I protect my Trusts beneficiaries in the event of a marriage breakup?

Question from karenperri updated on 6th December 2007:

I have an established family trust. The trust would now like to purchase a house for my son and his new wife. They will be paying off the house but established equity in two other properties will make it easier to get a loan. How do we protect the trusts interests but still in he event that their marriage breaks up, assure the wife (only a beneficiary of the trust if she is attached to my son) that her portion of the money she has paid into the house, will be given to her?

Our expert responded:

Part of the answer depends on whether or not you have other children. If there are children, a situation such as this may create issues if siblings feel another sibling is getting something that they themselves are not. One possible solution is for your son and daughter-in-law to set up their own trust and for your own trust to borrow the money for the deposit and then lend it to the new trust set up by your son. A proper loan agreement would be drawn up based on normal commercial terms (bearing in mind that you need to properly discharge your duties as a Trustee for your own Trust) and your Trust could then register the loan as a second mortgage against the property. In this way, whatever contributions your son and daughter make to the property will be between them, and the loan from your Trust to theirs will be secure. One possible issue with this is the Bank, so it would be wise to fully disclose to the Bank the details of the transaction.

Kenina Court is a director of Acorn Solutions Limited, an accounting firm dedicated to working with clients to help them create wealth. She is an avid property investor, entrepreneur and seminar presenter on asset protection and wealth strategies.



 



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