Sorry i have another question regarding trustee loans.
We are looking at creating a discretionary trust with myself as trustee. My wife and I (the individuals) are going to borrow against our owner occupied home, split 100,000 loan on P&I terms, paydown and redraw to onlend to the trustee on P&I terms.
Few questions
1. I am confused in regards on how to word a loan to reloan the funds to the trustee, so that the individual would pay the same amount of interest to the bank that they receive from the trustee. If the loan to the trustee was 'on the same terms as receieved by the lender' would this suffice, so that each year the individuals net interest would be zero??
2. I am also confused if the onlending loan is made later in the life of the loan, would this wording still be okay? As the principle and interest calculations would be different to the first year of a loan, I'm not sure this affects anything.
For example if the loan was made on the second year of the loan
- individual pays $4000 interest, $2000 principle
- trustee pays the individuals the same amount, and the $4000 interest is deductible?
3. Would a loan on such terms be sufficient without any security? I believe the loan would need be on arms reach, and onlending at P&I terms with the same rate without any security may not be what you would do to a stranger?
Thanks i hope that makes sense.
