Settlement of Trusts and Acting as Trustee or Protector

Trust is a kind of relationship in which a person, known as a trustor, transfers the legal ownership of some kind of valuable assets, to another person, known as a trustee, who in turn controls and manages them for the benefit of another person, known as a beneficiary.

In other words, a trust comes into effect when settlor or the original owner of the trust transfers his assets to trustor for the use of beneficiary. A trust is usually created as an instrument in writing, which should state matters like object of the transfer of the asset, subject, and duties and responsibilities that should be executed by trustee for beneficiary.

Settlement of trusts is done for a myriad of purposes such as protection against high taxation and economic instability, confidential purposes, to organize collective investments, to protect assets, and management planning. In addition, a trust is also created when assets cannot be held personally.

The Trust settlement law in Hong Kong is primarily modeled on the basis of the principles of the English Trustee Act 1925, and is included in the provisions of the Trustee Ordinance (Chapter 29.)

Among the key points regarding Trust Law in Hong Kong are:

- All types of trusts including fixed and discretionary trust can be established in Hong Kong. Discretionary trust is primarily established for the purpose of deriving benefit of owning a company's shares. A fixed trust is also established to derive benefits in connection with share ownership.

- Regarding taxation of trusts: only trading ones are taxable. Further, beneficiaries and settlors are not taxable

- Trusts such as fixed trust and discretionary trust can be used for international tax planning purposes

- Trusts are also used for the purpose of asset protection, i.e., an asset transferred to trust no longer forms part of the settlor's property. But, the transfer would be voidable, in case, if it is done to defeat creditors

- With effect from 11 February 2006, not any estate duty is levied on foreign assets

- Above all, the Trust Law in Hong Kong does not allow forced heirship. In case, if a person passes away leaving a will, then the executor distributes properties mentioned in it according to the will. However, the will is executed on the receipt of probate. In such a situation if a person dies without leaving a will, then all assets, both movable and immovable, are distributed as per the Intestates' Estate Ordinance

Further, when an asset is transferred, the person acting as trustee or protector is required to discharge certain duties, such as,

- A trustee holds the fiduciary responsibility as well as liability to handle the trust assets

- When assets are transferred to trustee, he becomes liable to prospective beneficiaries, claimants, and third parties

- In case, if a trustee incur a liability that go in excess of the property that has been transferred to him, then he is personally liable for that excess

- Trustee is paid for the duties executed as well as trouble in accordance with the trust agreement

- Trustees are usually considered prudent person with regard to meeting their fiduciary responsibilities, no matter it is any area of profession such as investment, finance, and legal

In Hong Kong, there are a large number of firms, providing superb services with regard to settlement of trusts, such as, payment of government rates and property tax, arrangement for repairs on behalf of the property owner, and rental collection. Further, on behalf of the property owners, these firms render services including preparing advertisements for letting, showing rental property to prospective clients, negotiation of rental rates, and making arrangement for tenancy agreements.

Superb services are also made available in connection with purchase and sale of property, like, dealing with documentation procedures on behalf of owners for completing the sale or purchase processes. Estate administration is also an area of specialization.

However, the quality of all these services depends on the professionalism and expertise of a firm as well as its staff. Hence, a thorough investigation must be done to find the most competent law firm or consultant to carry out your trust-related activities. With the introduction of the internet, a competent service provider can be easily searched online.

Getting Approved For a Loan: 4 Key Criteria

A common question most borrowers have is, "how is my loan application evaluated", or "what is an underwriter looking for?" There are 4 main criteria by which an underwriter evaluates a loan: capital, capacity, character, and collateral. The first three relate to the borrower, and the fourth refers to the evaluation of the property. Most of the documentation that must be provided in the loan application is for the verification and validation of these 4 parameters. The following is a discussion of each parameter:

*Capital*
Capital refers to whether you have enough money for the down payment and closing costs. If it's a purchase, and you're putting down 10%, the underwriter will want to know where this money is coming from.

For example, do you have this 10% in a bank account, a retirement account, or is it a gift from a relative? Gift money from other is certainly permitted, but there are restrictions with gift money.

The underwriter will also want to know if you have enough cash for emergencies. An underwriter will generally require 2 months (sometimes more) of PITI (principal, interest, taxes, and insurance) in a bank account or retirement fund, in case you come upon financially hard times and have trouble paying the mortgage.

*Capacity*
Capacity refers to your ability to repay the debt. Based upon the income indicated on your loan application, the underwriter will calculate your debt-to-income ratio (DTI ratio).

The DTI ratio is calculated by adding the minimum monthly payments of all your revolving (ie credit card) and installment (ie car loan) debt, plus your new mortgage payment (including taxes and insurance), and dividing by the monthly income indicated on your loan application.

For example, if you have $200 in monthly credit card payments, $400 in monthly card payments, and your new mortgage (principal, interest, taxes, and insurance all included) will be $3000, then the total of your new monthly debts will be $3600. If your monthly income before taxes is $8000, your DTI ratio will be $3600/$8000= 45%. Fifty percent (50%) is generally the maximum DTI a lender will allow.

*Character*
Whereas capacity refers to your ability to repay the debt, character refers to your past history in paying back your creditors. An underwriter will review your credit report and examine how you're handling current debt obligations, and how you've handled past debt obligations. Particularly, the lender will want to know if you've ever been late on a mortgage payment, ever declared bankruptcy, or ever been foreclosed upon.

Additionally, the lender will evaluate your tri-merged credit score. When you apply for a credit card or car loan, your credit is pulled from only one of the 3 bureaus (Equifax, Transunion, and Experian ). However, when you apply for a mortgage loan, your credit is pulled from all 3 bureaus; hence the term, tri-merged credit report.

Your score can vary widely with each of these bureaus, and the underwriter will only use one of these scores to make an approval decision. Specifically, the underwriter will take the median of the 3 scores, ie the middle score. So if a borrower has scores of 650, 690, and 740 reporting, the lender will use 690.

*Collateral*
The evaluation of capital, capacity, and character is specific to the borrower. However, since the borrower is pledging his/her property as collateral for the loan, the underwriter wants to know the value of that collateral.

To assess this value, a professional, certified appraiser that is a neutral third party to the transaction (ie not an employee of the lender and not a close friend or relative of the borrower) will be sent to the property. The appraiser will determine the fair market value of the property, ie the price that would be agreed upon in a sale between a willing buyer and seller.

If the property is a purchase, an appraiser will make sure the sales price is justified. In the event the sales price and appraised value are not the same, the lender will use the lesser of the sales price and appraised value.

There are several specific documents the borrower may be required to provide, such as proof of homeowner's insurance, W2s, paystubs, bank statements, etc. However each of these items serves the purpose of evaluating one of the 4 criteria listed above.

Copyright 2008 Jared Martin.

Fixed Rate Mortgage Reviews

This payment amount is independent of the additional costs on a home sometimes handled in escrow, such as property taxes and property insurance. Consequently, payments made by the borrower may change over time with the changing escrow amount, but the payments handling the principal and interest on the loan will remain the same.

Fixed rate mortgages are characterized by their interest rate (including compounding frequency, amount of loan, and term of the mortgage). With these three values, the calculation of the monthly payment can then be done.

Fixed rate mortgages are the most classic form of loan for home and product purchasing in the United States. The most common terms are 15-year and 30-year mortgages, but shorter terms are available, and 40-year and 50-year mortgages are now available (common in areas with high priced housing, where even a 30-year term leaves the mortgage amount out of reach of the average family).

Outside the United States, fixed-rate mortgages are less popular, and in some countries, true fixed-rate mortgages are not available except for shorter-term loans. For example, in Canada the longest term for which a mortgage rate can be fixed is typically no more than ten years, while mortgage maturities are commonly 25 years. In Australia banks are unable to offer fixed rates for terms longer than 15 years due to funding constraints.

In finance, negative amortization, also known as Neg Am, occurs whenever the loan payment for any period is less than the interest charged over that period so that the outstanding balance of the loan increases. As an amortization method the shorted amount (difference between interest and repayment) is then added to the total amount owed to the lender. Such a practice would have to be agreed upon before shorting the payment so as to avoid default on payment.

The fact that a fixed rate mortgage has a higher starting interest rate does not indicate that this is a worse form of borrowing compared to the adjustable rate mortgages. If interest rates rise, the ARM cost will be higher while the FRM will remain the same. In effect, the lender has agreed to take the interest rate risk on a fixed rate loan.

Some studies have shown that the majority of borrowers with adjustable rate mortgages save money in the long term, but that some borrowers pay more. The price of potentially saving money, in other words, is balanced by the risk of potentially higher costs. In each case, a choice would need to be made based upon the loan term, the current interest rate, and the likelihood that the rate will increase or decrease during the life of the loan.

The risk resulting from the fact that interest or dividends earned from an investment may not be able to be reinvested in such a way that they earn the same rate of return as the invested funds that generated them. For example, falling interest rates may prevent bond coupon payments from earning the same rate of return as the original bond.Pension funds are also subject to reinvestment risk especially with the shorterm nature of cash investments there is always the risk that future proceeds will have to be reinvested at a lower interest rate.

In the case of a mortgage-backed security (MBS), prepayment is perceived as a risk, because mortgage debts are often paid off early in order to incur lower total interest payments through cheaper refinancing. The new financing may be cheaper because the borrower's credit rating has improved or because interest rates are lower, but in either case, the payments that would have been made to the MBS investor would be above market rates.

Redeeming such loans early through prepayment reduces the upside of credit & interest rate variance in an MBS. The downside of these variances (interest rates rises or creditworthiness declines) does not normally induce a refinancing (since the fixed mortgage payments are now at below-market rates). The fact that MBS-holders are exposed to downside prepayment risk, but rarely benefit from it, means that these bonds must pay a slightly higher interest rate than similar bonds without prepayment risk, to be attractive investments.

Joli Royal

Payoff Your Mortgage - Use the Fastest Method Without Cutting Into Your Paycheck

The current mortgage system is designed to squeeze as much money out of you as possible...

WARNING: you're at a severe disadvantage because mortgage companies charge as much interest as long as possible without informing you in a clear way all the steps you can take to change it.

The current system requires your payments follow an "amortization schedule", which forces most of your money to go towards interest.

In the first five years, you could end up spending five times more in interest than in mortgage principal - and that's a huge chunk out of your paycheck! So if you make $12,000 in principal payments, you end up spending $60,000 in interest. Unbelievable! For a simple calculation go to Bankrate.

And when you move, the bleeding starts all over again...

The banks know you'll probably move again or refinance in 5 years, and then the cycle of paying more interest starts all over again.

It takes years before your loan balance is reduced by a small amount-how unfair is that?

How many years have you been paying off your mortgage and are you really further ahead?

But here's how to fight back...

You're going to love this...there's an improved method you can use to reduce these interest payments.

The way to do this is simple. Apply more of your monthly mortgage repayment to principal rather than interest without changing your repayment or refinancing your mortgage.

For example, if you pay $1,200 towards your monthly mortgage repayments, $1,100 goes towards interest and $100 towards principal early in the life of the mortgage.

You can pay more to principal, less to interest...and it's perfectly OK with the bank!

Hang onto your seat, because now there is a way to apply $900 towards interest and $300 towards principal without changing your lifestyle or paying more anything...and the best part is that the banks will gladly accept this!

This method has been around forever but nobody has figured out how to use it.

Until now.

Wouldn't you like to shave 13 years off your mortgage? You can! Here's how...

Your mortgage can be paid off in one-half to one-third of the time. Most of our clients shave at least 13 years of their mortgage without spending a cent more.

And no, you do NOT have to refinance or get another mortgage; just have an open mind and a willingness to tackle a common math problem!

The concept is really simple. All you have to do is use a mortgage checking account the right way. Once you set this up you begin immediately allocating more of your payments to principal rather than interest and end up paying your mortgage much faster. The best part of all, the banks happily accept this.

Here are the 7 basic steps you need to follow:

1. Calculate your personal "HELOC number."

2. You set up a Home Equity Line Of Credit (HELOC) for the Heloc number.

3. You pay your bills and mortgage on time.

4. You transfer money to your HELOC at the right time.

5. Your bank takes care of the rest-and they're happy to do it!

6. Create a spreadsheet to make sure you stay on track.

7. ...and YOU PAY OFF YOUR MORTGAGE AS EARLY AS 13 YEARS SOONER THAN NORMAL, AND SAVE AN AVERAGE OF $67,636 CASH!

You will NOT have to change your day-to-day spending habits or your lifestyle to take advantage of this concept। It's a sound, smart way to pay down your mortgage.

Joli Royal