Use a Trust to Secretly Buy Your Neighbour’s House!

Another gem, courtesy of Brett Davies, Law Central


I want to buy a property from a person that knows me. I don’t want that person to know that I am buying his home. I have a friend lined up to make the offer. I can’t work out whether I need your Declaration of Trust or your Acknowledgement of Trust. The property is situated in South Australia.


Declaration of Trust

You use a Declaration of Trust when you are about to buy something.

The Declaration of Trust is sometimes called a Bare Trust. It is one of the many types of trusts available in Australia. A Declaration of Trust is a legal structure that allows the division of the beneficial and legal ownership. It divides the asset into 2 parts: beneficial (real owner) vs legal/trustee (mere protector of the asset for the beneficial owner).

The person holding the asset for your benefit is the trustee. The trustee has legal ownership only. You are the beneficiary. You have beneficial ownership. Provided you are over 18 years of age and of sound mind you boss the trustee around. You tell the trustee what to do with your asset. To the world, the asset may look as though it belongs to the trustee. However, in reality the asset is yours because you are the beneficiary.

If you have a Declaration of Trust, then at any future time you can instruct the trustee to transfer the asset into your name beneficially. Of course, this is exactly what you want to do. This how you do it:

  • Sign and date the Declaration of Trust AT LEAST ONE DAY before your friend makes an offer to buy the home. (The stamp duty is nil or just a few dollars on the Declaration of Trust).
  • Your friend makes the offer in his own name. The offer is accepted.
  • You can keep up the charade and have the home registered with the local titles office in your friend’s name. However, generally you have the property put directly into your name. You use the Declaration of Trust to ensure that you don’t pay double stamp duty. You still pay the normal stamp duty, but only once.

The rules are similar in each state. I have explained the actual South Australian stamp duty position.

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