If you are thinking about establishing a corporate trustee, it is important to know how it works and when it may benefit you. In this article, we’ll explain what a corporate trustee is and how this type of structure works.
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Corporate trustees
Corporate trustees, known as directors, run trusts as a distinct legal entity. As they are companies, directors of a trust also enjoy the protection of limited liability. Generally, directors cannot be personally liable for external legal issues involving the trust. Furthermore, changing directors is relatively easy due to the trust being distinctly separate from its trustees.
Where a company is created to manage a trust, it operates as a corporate trustee. A distinguishing feature of this structure is that assets of the trust must be registered in the name of the company.
Corporate trustees are often created for self-managed super funds (SMSF). It can mean less bureaucracy in management and more flexible options for estate planning and succession. They can also manage family trusts. This is because the structure allows the trust to continue indefinitely, even after the passing of a trustee.
It is always advisable to discuss your options with a business lawyer.
Trustees
A trustee is the entity which holds the trust property. There can also be more than one trustee of a trust. The trustee has to be capable of holding trust property in their own right. Trustees owe the following duties to beneficiaries:
- To preserve trust property
- Acting in good faith
- Loyalty to beneficiaries
- Impartiality
- Keep accurate records and information
Why use a corporate trust?
Some of the advantages of a corporate trustee structure include:
- Longevity: a corporate trustee does not end if a director dies. This makes succession and control of the trust easier because there is no need for the court or appointer to assign a new trustee
- Assets are less likely to be mixed, personal assets are held separately
- Reduced liability: the company is a separate legal entity
- Flexibility with membership: new members of the trust are introduced, there is no need to transfer legal title (it is in the company’s name); simply appoint a new member and notify ASIC
Similar to other trusts, a corporate trustee structure may be complex to understand. If you’ve decided on the structure, read our guide on how to create a corporate trustee.
