What Is A Corporate Trustee? (And Why You Should Use It)
In today’s post, we will address the burning questions on corporate trustees.
To know more about family trusts, you can visit here - https://www.wryde.com.au/news/what-is-a-trust
What is a Trustee for a trust? And what do they do?
A trustee is the entity responsible for holding and managing the trust property. There can be multiple trustees for a single trust. Trustees must be able to hold the trust property in their own name and have several key duties to the beneficiaries, including:
Preserving the trust property
Acting in good faith and impartially among beneficiaries
Demonstrating loyalty to the beneficiaries
Maintaining accurate records and information
Trustees can be individuals, multiple individuals, or a company, known as a "corporate trustee."
Why use a corporate trustee over an individual trustee for a trust?
A corporate trustee restricts liability to the corporation’s assets, thereby safeguarding the personal assets of the corporation’s directors. If a corporate trustee cannot cover a debt, personal assets like a director’s home remain secure. This setup provides better asset protection since assets in a separate trust managed by a corporate trustee are protected from personal lawsuits.
Moreover, when directors or shareholders of a corporate trustee change, there is no need to modify the legal ownership of the trust’s assets. In contrast, when an individual trustee dies, the legal ownership must be transferred, complicating the succession process. It is also easier to keep trust assets and personal assets separate when they are held under different names (Important!).
If corporate trustee is so much better than individual trustee, why doesn’t everyone go for it?
Generally, the main reason is due to cost. Maintaining a corporate trustee involves bigger costs compared to individual trustee. The main costs being, the following.
Setting up a company which is generally approx. $1,500 - $2,500
Yearly On-going ASIC compliance cost of approx. $300
If choosing an ASIC agent to manage compliance, then the additional cost is approx. $300 yearly
All the above costs compared to individual trustee’s cost of virtually nothing.
Conclusion – What are the key takeaways?
Choosing between an individual trustee and a corporate trustee for your family trust depends on your specific personal and business circumstances. While a corporate trustee involves higher setup costs, it offers benefits like ensuring the family trust's continuity, enhanced asset protection, and limited liability. For more information on how a corporate trustee can better protect you and your assets, please contact us at hello@wryde.com.au.
Disclaimer: The information contained in this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs and where appropriate seek professional advice. Taxation, legal and other matters referred on this website are of general nature only, and are based on interpretation of laws existing at the time and should be not relied upon in place of appropriate professional advice. Those laws may change from time to time.