NZ Acknowledgement of Debt - Trust Loan to Individual

Deed of Acknowledgement of Debt on Demand - Trust Loan to Individual

Use this document where a Family Trust has lent money to a beneficiary and wants to record the terms of the loan.

Before the Trustees lend money, it is important to check the Trust Deed to confirm that the Trustees have the power to make the loan and that the Borrower is a beneficiary of the Trust. The Trustees also need to satisfy themselves that the loan is an appropriate way to use the Trust’s property.

Generally loans from a Trust to a beneficiary are repayable “on demand”, meaning that the Trustees can choose when the loan is to be repaid. The Trustees usually make this decision in consultation with the beneficiary who has borrowed the money. In deciding when the loan should be repaid, the Trustees also need to take into account the other beneficiaries’ needs.

A Trust may decide to loan a Beneficiary money, rather than give the Beneficiary the money outright, in circumstances where the money may be at risk if it is given outright. For example, if the Beneficiary is in a new relationship, or is at risk of being sued. Specialist advice should be taken in these circumstances to ensure the Trust and Beneficiary are protected.

This document sets out:

- how much has been borrowed;
- the purpose of the borrowing;
- what interest rate (if any) will be charged on the loan;
- how the Trustees can demand repayment;
- the default interest rate that will apply if the beneficiary doesn’t repay the loan or the interest when it is due.

Checklist is not available for this document.

Sample is not available for this document.

The Borrower(s)
• Can I borrow money from the Trust if I’m not a beneficiary?
Interest Rate?
• Can the loan be interest free?

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The Borrower(s)

• Can I borrow money from the Trust if I’m not a beneficiary?

  The Trustees would need to carefully consider whether it was appropriate to lend money to a person that isn't a beneficiary and whether they had the power to do this under the Trust Deed. Generally, Trustees only have the power to lend money on non-commercial terms to beneficiaries, for example, to lend money without security, at a low or nil interest rate.

  This hint is provided by Cavell Leitch.

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Interest Rate?

• Can the loan be interest free?

  Yes, and Trustee(s) often lend money to beneficiaries on an interest free basis.
  
  The Trustee(s) decide whether or not to charge interest at the end of each year. The Deed give the Trustee(s) the option to choose not to charge interest.
  

  This hint is provided by Cavell Leitch.

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This document has been prepared by Cavell Leitch