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Bank of Mum and Dad Trusts

What is the Bank of Mum and Dad?

The "Bank of Mum and Dad" (BOMAD) is a nickname for parents, and sometimes grandparents ("Bank of Nan and Pop", BONAP), who help their kids financially, especially to buy a home. With house prices increasing, it's harder than ever for young people to save for a deposit. This support, worth about $35 billion annually, makes the Bank of Mum and Dad one of Australia's top mortgage lenders. But without proper planning, this help can backfire. Helping your child is a big deal, but it's risky without proper planning and structure. Parents who gift or lend money without clear terms often face unexpected issues, like losing their money through disputes or straining family relationships. A BOMAD Trust fixes this by protecting your money and keeping things fair.

Help Your Child Buy a Home with a BOMAD Trust

A BOMAD Trust is like a secure piggy bank that lets you help one child, with for example a home deposit, while keeping your other kids' inheritance fair and your money safe. You gift money into the trust, which then lends it to your child with clear rules. This setup protects the money from risks like divorce and keeps it out of your estate, so there's no confusion later.

  • You're in Control: You as parents manage the trust until you pass it on to your child or pass away. 
  • Safe and Fair: The money is protected and won't affect what your other kids inherit. 
  • Flexible: You can pass control to your child whenever you're ready.

How does it work?

Once a BOMAD Trust is established, you gift the funds to the trust. The Trust then loans this amount, either interest free or at interest, to your child.

  • STEP 1: Establish BOMAD Trust
  • STEP 2: Parents gift funds to BOMAD Trust
  • STEP 3: Trust lends these funds to child
  • STEP 4: Funds are protected

Having a properly documented loan in place between the trust and your child protects the funds from claim in divorce, by creditors, and more.

Initially the parents will be Principal Beneficiaries and Appointors, thus controlling the trust. The parents will also be the Trustees. On their passing or resignation, these roles will transfer to the child, giving them the control.

Our Comprehensive BOMAD Trust Package

For just $3,300 (incl. GST), Macquarie Group Services offers a complete BOMAD Trust package, expertly designed to secure your financial support for your child while protecting your family's future. This all-in-one solution contains every essential element required to achieve the maximum benefits of the BOMAD Trust we have specifically developed for parents lending money to their kids—Trust Deed, Deed of Loan, and Deed of Gift. They work together to deliver the full benefits and protections of a BOMAD Trust.

Trust Deed

Establishes the legal framework of the trust, defining its rules, beneficiaries, and controls of trustees and appointors. This document ensures the funds are managed according to your wishes, keeping them separate from your estate to avoid disputes among heirs

Deed of Loan

Formalizes the loan to the child, with flexible terms like optional interest and repayment dates. It protects funds from risks such as divorce or bankruptcy, ensuring clarity and preventing courts from treating the money as a gift

Deed of Gift

Records the funds gifted to the trust, safeguarding them from your estate and potential claims. This step is crucial for maintaining fairness across your family's inheritances

Helping your child without a BOMAD Trust can be a serious mistake!

  1. It's seen as a Gift: Without Legal documents, courts often assume money given to kids is a gift, not a loan, so it's not protected
  2. Family Disputes: If money is part of your estate, other kids might demand repayment, causing fights. A BOMAD Trust keeps it separate
  3. Lost to Divorce or Debt: Without protection, the money could be claimed by their spouse in a divorce or lost to creditors
  4. No Documentation: A lack of documentation or formal arrangements can cause issues when circumstances change

 

A BOMAD Trust avoids these pitfalls with clear, legal agreements that protect everyone.

Is it a loan or a gift? It's YOUR choice

The BOMAD Trust package offers parents flexibility in supporting a child, whether they intend the funds as a gift or expect repayment as a loan. The trust's loan can be tailored to meet your preferences and expectations.

Gift
When NOT expecting repayment

Parents may choose no interest and no strict repayment schedule, meaning the child isn't required to make repayments. Upon the parents' passing, when the child gains control of the trust, they will be both the borrower and the trust's manager, allowing them to forgive the loan and erase the debt, effectively treating the funds as a gift. Alternatively, the loan can remain in place to protect the funds from claims, such as in a divorce.

Loan
When expecting repayment

Parents can specify a repayment date and include interest if desired, ensuring the funds are repaid to the trust, preserving assets for other beneficiaries or future use.

Set and forget

A BOMAD Trust package makes supporting your child financially both secure and hassle-free, with no ongoing costs when set up thoughtfully. By choosing an interest-free loan your BOMAD Trust incurs zero maintenance fees or annual expenses. Since the trust generates no income (e.g. interest), it requires no yearly tax returns, allowing you to “set and forget” while the trust continues to protect your funds from risks like divorce or bankruptcy. This simplicity ensures your generosity remains safeguarded without the burden of ongoing administration, preserving family harmony and your financial legacy.

Features That Make a Difference

Your BOMAD Trust can be tailored to fit your family. Here's some of what you can choose:

Lockdown Option

Control passes to your child after one parent passes, locking the trust from further changes

Non-Lockdown Option

When a parent passes away, the surviving parent keeps control and can make changes to the trust until they pass or step down

Bloodline Protection

Only your blood relatives can benefit from the trust, keeping the money safe from spouses or others

Existing Loan Flexibility

Incorporate an existing loan by moving it into the trust and receive all the benefits a BOMAD Trust offers

Features of a BOMAD Trust
Incorporating Existing Loans into BOMAD Trusts

Benefits of a BOMAD Trust

A BOMAD Trust offers a wide range of benefits when assisting your children financially.

Protect Your Money
Shields funds lent to your child from risks like divorce or creditor claims, ensuring they remain secure
Ensure Fair Inheritance
Keeps gifted funds separate from your estate, preventing disputes among siblings and maintaining equitable distribution
You Maintain Control
Allows parents to remain in charge as Principal Beneficiaries and Appointors until they choose to pass control or pass away
Flexible Options
Offers choices like Lockdown or Non-Lockdown variations, plus a bloodline feature to limit beneficiaries
Reduce Family Disputes
Clarifies financial support for one child, minimising potential conflicts over inheritance or loan repayment
Support For Existing Loans
Enables parents to formalise prior loans by assigning them to the trust, incorporating the protections offered by a BOMAD Trust
Peace Of Mind
Rest easy knowing your BOMAD Trust protects your wealth and supports your child
Comprehensive Solutions
A BOMAD Trust offers a complete framework to manage loans or gifts with professional precision
Promote Family Harmony
By clarifying financial support, a BOMAD Trust fosters fairness and unity among siblings and future generations

Your Questions Answered

Why should I choose the BOMAD Trust package?

Our $3,300 package (Trust Deed, Loan Agreement, Deed of Gift) ensures your money is protected and our documents have been designed to work together seamlessly.

Is a BOMAD Trust hard to set up?

Not at all! You just pick the option that suit your needs and situation best. We've made it as easy as possible to get stared and our package provides everything you need.

Can I include a loan I already gave my child?

Yes, we can move existing loans into the trust, so you can protect those funds and receive all the other benefits of a BOMAD Trust

How does bloodline protection work?

It ensures only your direct family descendants, not your child's spouse, can benefit, protecting the money from divorce or claims.

What happens after we pass away?

Control of the Trust passes to your child or the surviving parent, based on your chosen setup, keeping the trust on track.

I want to gift the money to my child, why is there a loan agreement?

By structuring the gift as a loan, it creates documentation which protects the funds from claims in the event of divorce, bankruptcy and other events. It can be set up with no interest and no specific repayments. When the child controls the trust after you pass away or give them control, they can forgive the loan, essentially making it a gift as you intend.

 

Get Started Today

A BOMAD Trust from Macquarie Group Services is the smart, safe way to support your child to buy a property. What better bank than the Bank of Mum and Dad?

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