When setting up a trust, selecting an appropriate trustee is a critical decision. The trustee is the party responsible for managing and administering the trust’s affairs and can be either an individual or company. The appointer (i.e. you) nominates the trustee during the set-up process. Below, we summarise the differences between an individual trustee and corporate trustee.
An individual can be appointed to act as trustee. This person is responsible for carrying out their duties under the trust deed. The individual is personally liable for the trust’s debts, so when a trust incurs debt, the individual’s personal assets are at risk if the trust can’t repay those debts. The individual acts in their capacity as trustee when carrying out the trust powers and enters transactions in their individual name as trustee for the trust.
A company can be nominated to act as a trustee. The company can be operating already, or you can register a new company for the purpose of acting as trustee. We recommend that you register a new company so that no existing company liabilities are carried over to the trust (which could possibly affect the trust). The company then acts as trustee for any conduct of business by the trust.
You would register the corporate trustee in the same way as any other company, with shareholders and directors. Importantly, although the shareholders and directors may be behind the decisions of the corporate trustee, they are not the trustee.
What’s the Difference?
When choosing whether to have an individual or corporate trustee, you will need to weigh up which best suits your circumstances.
Click here to view table.
Selecting the right trustee is important because they exercise a significant amount of control over the trust’s affairs. You want to ensure that your trust is properly run and serves the purposes for which you set it up.
When selecting a trustee, you can choose to nominate either an individual or a company as the trustee. There are benefits to both, and you should make your decision based on your specific circumstances and your main areas of concern. Whether you have nominated an individual or company as trustee, they should understand their duties and obligations under the trust deed.