Gift and Loan Accounts


Often the trust will accept a loan from one or more of it (deemed) Settlors.  Since loans may be individual, joint or unrelated we have elected to treat loan accounts as separate accounts created when they are needed to be created.

When the trust receives money from a third (or related) party by way of loan you need to acknowledge the debt.  There are several steps involved:

  1. Create (if not already created) debt facility accounts for the lender(s) using Add a non-bank debt facility. Lenders may be treated separately (in which case they will have separate debt facility accounts) or together (in which case there will be one debt facility account).
  2. Record the debt using Acknowledge debt (alternatively debt can be recorded through Acquire an asset or Pay money by selecting payment out of the relevant debt facility accounts).
  3. Record any gifting using Forgive debt (gifting) or any cash repayments by the trust using Repay debt (alternatively repayment can be recorded through Dispose of an asset or Receive money by selecting receipt into the relevant debt facility accounts).

Over time additional loans may be advanced and should be recorded as per step (2) above.  Also, over time, additional gifting may be performed or repayments made and these should be recorded as per step (3) above.

The key steps describes above are detailed in the following sub-sections.

Creating a Loan Account

Suppose the Settlors have loaned the trust some money.  The first step is to create a Non-bank loan.

  1. Select Add a non-bank loan from the I would like to... menu:

  2. A form will display allowing you to enter the name of the third party providing the loan (or to whom the loan is being provided) and some descriptive information:

  3. You may optionally establish an opening balance at a given date.  It is important to note that if you do this then a transaction will be created representing this opening balance.  A transfer will be made against the newly created loan account and this will be balanced against a special internal account called Conversion account.  Ideally the conversion account should have zero balance and there should be some other offset against this to represent where the loan has actually gone.  In general it would be preferable to acknowledge the loan either by way of receiving money or acquiring an asset.  That way it is clear where the funds have actually gone.
  4. Click on Create to create the account.

Acknowledging Debt

Overtime loans will be made to the trust and the trust will either may repayments on the loan or receive gifting.  In the former case we can acknowledge debt by either receiving money, paying money or acquiring an asset.

Debt by Direct Loan

When debt has occurred by the direct loan of money, use acknowledge debt:

  1. Select Acknowledge debt under the I would like to... menu:

  2. A form will open allowing you to enter the details of the transaction:

  3. Make sure you select the non-bank loan category for the Which loan account option (in the example above this was The Settlors as an existing loan facility).  The amount received should also be directed to where the money has been received (in the example it is the trusts current account).
  4. Click on Create to create the transaction.

A new transaction will be created and will record the various transfers:

and The Settlors account will record the additional debt:

Debt by Covering Expenses

Often a third party will cover some expenses of the trust and thus result in a debt to the third party for those expenses.  To record these use the pay money option:

  1. Select Pay money from the I would like to... menu:

  2. A form will open allowing you to enter details of the transaction:

  3. Make sure you select the loan account as to Where the payment is coming from (in the example this was The Settlors).  Also note that you must record at least once expense.
  4. Click on create to Create the transaction:

Debt by Acquisition

Another way of acknowledging debt is by way of acquisition of assets by the trust.  This is slightly more complicated in that there are several options to acquire an asset.  For the purpose of acknowledgement of debt the relevant purchase option is As a purchase by the trust.

To acquire an asset select Acquire asset from the I would like to... menu and complete the form that displays ensuring that theAs a purchase by the trust open is selected.

The example above illustrates purchasing a property where there are additional expenses to consider and the money is being provided by way of mortgage to the trust an a loan from the Settlors (jointly).

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