The eCompanies Blog

Should I use a corporate trustee for my family trust?

Posted by , February 10th, 2015

When setting up a family trust you have to choose what type of trustee you want to control the trust. The trustee may be one or more individuals, or a private (i.e. proprietary limited) company specifically setup to act as trustee. The advantages of using a corporate trustee are typically listed as:

  • Limited Liability – As a company is a separate legal entity it has the benefit of limited liability and the individual directors will not be personally liable, excluding exceptional circumstances. For example fraud.
  • Separation of assets – It is much easier for a corporate trustee to ensure that trust assets are kept separate from personal assets as they are held in a different name. In keeping with this advantage it is usually recommended that being trustee is the sole purpose of the company, if it is carrying on a business it can be confusing whether it is holding assets in its own name or for the trust.
  • Simple succession – A corporate trustee does not cease upon the death of one of its directors. Whereas if an individual trustee dies (in particular if they are the only remaining trustee), there may be difficulties with regards to the administration of the trust.

The main drawback to using a corporate trustee is the cost. Registering a company costs upward of $500 and has ongoing annual asic fees. The counter argument is that if the cost of the trustee is a significant factor in forming the family trust, then it may not be worthwhile to form the trust in the first place.

As always it is well worth getting professional advice for your circumstances, a small investment up front can minimise large costs down the track. Finally it is worth remembering an interesting anecdote, the vast majority of family trusts set up by lawyers have a corporate trustee while the reverse is true for trusts set up by accountants or individuals!



Google+ Facebook