Golden tips for trust names

Getting a home loan and buying property in a trust can help reduce your income tax, provide asset protection and help facilitate estate planning.

However, learning how to name a trust is a lot more complicated than you might think and could even see you knocked back for a trust loan.

General rules on naming your trust

The shorter the name, the better.

It can be tempting to get overly creative when naming your trust but the longer the trust name, the less likely banks and other organisations will be able to process it.

For example, ‘The Steve Anderson Super Happy Family Trust’ will be accepted by the Australian Securities and Investments Commission (ASIC) but bank systems simply won’t accept it.

In order to fit on bank and mortgage statements, you may be forced to truncate or abbreviate the name which may create confusion if you’re audited by the Australian Taxation Office (ATO) come tax time.

The abbreviated version of your trust name won’t match the actual trust registered with ASIC.

Although your accountant knows that your mortgage and property is in the name of the trust, you may have to provide further evidence that this is the case.

We can work with you and your accountant to get your trust loan approved!

Call us on 1300 889 743 or fill in our online enquiry form to get a free assessment.

Having a unique name isn’t a requirement

For all intents and purposes, a trust functions just like a natural person owning an asset.

Because of this, you’d think that your trust needs a unique name that can be added to a property title deed and tax documents.

Your trust can actually have the same name as an existing trust since the proof is the trust deed and each trust deed has different details and dates.

Similarly,

Discretionary and unit trusts aren’t registered with a governing body like companies and business so it’s common for many trusts to have the same name.

This would be a problem with family trusts but the above trust types come with a unique Australian Business Number (ABN) identifier.

What are acceptable trust names?

Most people name their family trust using their family name and incorporate the words “holdings”, “retirement”, “property”, “property trust” and “investments”.

Short and sweet is usually best but it doesn’t mean it shouldn’t be distinctive.

For example, “Anderson Family Trust” is better than “Anderson or the “George St Holding Trust”.

Also, for the purposes of holding property, you should be specific in the name as per the purpose of the trust.

For example, “Anderson Property Trust” as opposed to ‘Anderson Investment Trust’, which may hold stock and funds management investments as opposed to real estate.

This makes it more unique and easier for entities to identify it correctly for legal and accounting purposes such as distributions or in the event of divorce or a legal dispute.

It also helps if you have multiple trusts such as a discretionary trust, a family trust and a self-managed superannuation fund (SMSF).

On a general note, try to avoid anything that’s offensive because the trust will be on legal and financial documents for years to come.

For more golden tips on buying property or investing using a trust, check out the trust information page.

You may want to avoid using your family name

Depending on the size of the portfolio you’re looking to build and whether it will include other investments, some accountants may advise you to not use your family name in the trust name.

In this way, it removes all references to you at the personal level and provides you with a great level of asset protection.

What to avoid when naming your trust

No unusual characters or unnecessary words

Avoid using unusual characters such as question marks, exclamation marks, hashtags or star symbols.

For example, “10/22 – 24 George St, NSW – Holding Trust” is not a good name as some bank and other organisation systems cannot handle the symbols ‘/’ and ‘-‘.

On that note, avoid words that simply add more length to the trust name such as ‘the’.

Don’t use the word “trustee”

If your trustee is a company, the trustee name cannot have the word “trustee” in it.

For example, “Steven Harris Trustee Company Pty. Ltd” is not a legal name.

Don’t use the word “development”

Using the term “development” or “development trust” will cause many lenders to assume you’re a developer and decline your home loan.

The only exception is if you require a commercial loan to buy commercial real estate or land with the view to develop commercial or residential property.

This will require a solid business plan and you’ll need to be in a strong financial position to be considered for a loan.

If this is you, please call us on 1300 889 743 or complete our free assessment form today.

Avoid a numbering for multiple trusts

Numbers are ok but try to avoid doing this for the purposes of keeping track of multiple trusts.

It’s common, for example, for someone to have multiple SMSFs for asset protection reasons.

However, let’s say you were to get divorced or sued by a tenant of one of your residential or commercial investment properties held by the SMSF.

If the property your wife or tenant resides in is held by “Dawson Super Fund No. 2″, the obvious question becomes where is ‘Dawson Super Fund No. 1”?.

What this means is that you could find yourself taken to court and claims being made for a larger settlement if they find that you have more assets.

You can still be descriptive and differentiate between your trust names by using a short descriptor such as “Dawson Retirement Trust”, “Dawson Property Fund” or “Dawson Family Trust”.

You should seek advice from your accountant regarding setting up the right trust structure for you and whether you’d like to change your structure in any way such as appointing a new trustee.

Avoid terms associated with “real” companies

ASIC sets out clear guidelines as to what terms a trust can and can’t use.

Specifically, you need to have certain corporate and company licenses and be engaged in certain activities in order to use the following terms:

  • Bank
  • ANZAC
  • Incorporated
  • Building society
  • Royal

Similarly, if you’ve set up a corporate trustee, you cannot have the words ‘trust’ or ‘trustee’ in the trust name.

There needs to be a clear legal separation between a trust, an operating company and a company set up for tax purposes.

Avoid names related to criminal activity

Banks and lenders are always trying to tighten their fraud detection capabilities so avoid using a name that is related to organised crime or criminal activity.

For example, if your last name is Escobar, your ‘Escobar Family Trust” may get flagged as a criminal entity related to Pablo Escobar.

This is obviously a joke but you can see how the bank may take this quite seriously. Your home loan application may even be knocked back.

In NSW, for instance, organisations listed in the Crimes (Criminal Organisations Control) Act 2012 are automatically highlighted by sophisticated bank systems.

Tips for naming your SMSF

If you’re purchasing an investment property for your SMSF then the bank will be dealing with both the trustee (individual or company) and the trust.

This can get confusing and cause errors so it’s best to spell it out for your lender. For example:

  • SMSF trustee: John Smith Holdings Pty Ltd.
  • SMSF trust: The John Smith SMSF.
  • Trustee of the bare trust: George St Holdings Pty Ltd.
  • Bare trust/holding trust: George St Holding Trust.

Another big tip is to use the word “super” as opposed to “superannuation”.

Again, this has to do with simplicity and minimising potential data entry errors.

What about naming a corporate trustee?

Some people decide to set up an SMSF with a corporate trustee from the start rather than changing to a corporate trustee when the SMSF is worth over $1 million.

Whether you have a corporate trustee from the start or wait to till your fund grows large enough to justify the cost, there are few things to keep in mind with the name.

Generally, shorter is better.

However, in order to differentiate your trust, most people tend to use the word ‘Pty Ltd’ (as opposed to ‘Pty. Ltd’ or ‘Proprietary Limited’).

Why would I buy a property in a company name?

In the past, companies were eligible for the 50% capital gains tax (CGT) discount that individuals received if they held the property more than 12 months.

Because of this, buying a property in a company name has become less popular, although there are still asset protection benefits to take advantage of.

In addition, if the property is positively-geared, income tax is capped at 30%, which is lower than the 49% that are individual investors are subject to.

That said, Shaw says there are some benefits to owning properties within a company structure, including increased asset protection.

Read more about how to buy a property in a company name.

What if I want to change the trust name?

The trust name should be consistent from year to year, except in the year of a name change.

There are many reasons you might want to change the name of your trust:

  • Incorrect spelling
  • The death of loved one whose name was used in the trust name
  • Divorce
  • Offensive
  • You’re a bit embarrassed (maybe you named it when you were in your early 20s!)

These are legitimate reasons and a solicitor can help you with this to avoid mistakes.

If the trust name is legally changed, advise your mortgage broker in writing at the time the change is made so we notify the lender.

The reason is that banks struggle with trust loans as it is and their credit department can get confused if they’re presented with multiple deeds.

Changing the name of your trust or trustee means you need to update everything from your land title, mortgage, share registry, bank accounts and anywhere else that involves payments to or payments made.

How do I change trust names?

You’ll need to submit a Deed of Amendment to change the name of an existing trust.

This will need to be completed as per the terms of the original deed so it’s best you speak to your solicitor to avoid the change being deemed invalid.

When this process is complete, you’ll receive:

  • A Deed of Name Change (to be kept with original trust deed).
  • Trustee Resolutions (if the trustee is a company).
  • Unitholders Resolutions (for unit trusts).
  • An explanatory letter.

Stamp duty may apply to a Deed of Name Change.

Can I apply for a home loan before I set up my trust?

If you’re applying for a home loan before you set up your trust then be aware that some lenders don’t allow this.

Secondly, if the lender does allow this, then you should inform them of the proposed name in advance and make sure that this is exactly what you use when you set up your trust.

Please call us on 1300 889 743 or complete our free assessment form to speak with one of our experienced mortgage brokers.

We’re experts in trust loans!

  • Anney

    For a property development, is it easier to borrow as a Trust or Company structure? I heard lenders usually prefer to lend to a company than a trust for security reason. Is it so?

  • Hi Anney
    For a larger development (e.g. 5 dwellings or more) then most lenders don’t have a preference for a company or a trust. It should therefore be discussed with your accountant as their input is most important. It’s good to discuss with the lender first before setting up your entity as it may be an issue for a minority of lenders.
    For smaller developments (e.g. 4 dwellings or less) then sometimes this can qualify as a residential loan and in these cases it may be better to just do it in your own name. Of course there is a more to consider than just the loan such as legal liability, tax and if you have partners in the development so it may be better to still operate as a company or trust.

  • Anney

    When considering a residential loan for a smaller development (e.g. 4 dwellings or less), do lender look at number of dwelling e.g. <4 or the borrowing amount/construction cost? For example, in some area a 4 dwelling development could cost 1 millions whereas in another area 4 dwelling could cost 2 mil.

  • Hi Anney
    They look at both. This is a really complex area of lending that you’re asking about with 20 – 30 factors that we would look at as part of our assessment so it is beyond the scope of what can be practically discussed on our website. Realistically it’s best to speak to one of our mortgage brokers. Shanker in our team is experienced with commercial lending and he is likely the best person to speak to.

  • Money Business

    Hi there, i have my client who has director default listed on his credit file.. the home loan is under trust which he wants to refinance. Is there any option?