What is a hybrid trust?

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Hybrid discretionary trusts can be hybrid discretionary or hybrid unit trusts.  The former are the more common and take the best features of both discretionary and unit trusts and mixes them together in the one entity to create a powerful and flexible tax planning solution.

They are typically used to gear into property where an individual will borrow to purchase the units in the trust (usually using the property purchases by the trust as security) and then, when the property is no longer geared, the trust can repurchase the units (often borrowing money to do so).

Care needs to be taken when establish such a structure as not all trust deeds are adequate to allow the individual to claim the tax deduction for the interest expense on the loan.

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