What would you do in this scenario?

Hello all,

Seeking your learned advice/thoughts on an upcoming scenario.

My husband and I own three IPs in a hybrid discretionary trust.

The discretionary feature is one of the main reasons we chose to buy in a trust. But this only comes into play when there is no debt remaining on the properties inside the trust.

On each property, there's a debt of approx $120K remaining.

Early next year, we will be selling our current PPOR. We will walk away with about $850K. We're moving to a more expensive area, and will buy a new PPOR worth about $1 million.

We have one child, age 18, not working.

The advice I am seeking regards the best use of our PPOR proceeds.

I am wondering if it is best to use 100% of that money as the deposit on our new PPOR, and just continue as we currently are, nibbling away at the IP loans.

OR


While we have some unlocked cash, is it better to pay out the loans on the three IPs? And distribute the income from the trust to our non-working son? (He will be earning little or no income for the next three to five years, while at uni.) This would mean a bigger loan on our PPOR, however.

What are your thoughts on this scenario? It will be a loooong time before we have access to this much unlocked cash again, and I want to use it in the most effective eay possible.

Cheers.
 
What you've been doing is obviously working for you so why tinker with something that's not broke.

We cant really say what you should do though.

We are all different with different circumstances, finances, goals, time frames & personal risk profiles.

So what people suggest here will not be comparing apples with apples If that makes sense?

Based around MY circumstances, finances, goals time frames and personal risk profile, I would use 100% of the funds towards the purchase of next PPOR..because its non tax deductible.

The smaller your non deductible debt the better and the bigger your asset base the greater your exposure to potential CG.
 
Last edited:
Thanks, Rixter.

Yes, I totally get that everyone's situation is different.

I'm just looking for some other perspectives.

I was just musing if it might be better to pay out the IPs while we can "take advantage" of our son's non-working status. By the time we pay IPs off using our current methods, he'll (hopefully) be working.

Anyway, we'll think about it some more.

Cheers.
 
My calculator and I have worked out there is no real benefit to paying out the properties in the Trust . . . at least not in the medium term.

The tax-free income would be less than the extra interest payable on our new PPOR loan.

So there you go.
 
Back
Top