Reading time: 3 minutes

Are you looking at operating your business through a trust? Have you decided who will be the trustee of the trust? A trust cannot operate business and it cannot enter into contracts. Every trust requires either an individual or a company to be appointed as a trustee to operate the business and enter into contracts on behalf of the trust. Put another way, every trust requires an Individual or Corporate Trustee.

Individual trustee

An individual trustee is appointed in the process of setting up the trust and there is no need to set up a company or incur any further costs. The process for appointing an individual trustee is quite simple and economical. There are, however, a few disadvantages of having an individual trustee.

Firstly, being an individual trustee comes with responsibilities. The trustee acts on behalf of the trust and manages it, and if something goes wrong, the individual trustee may be personally liable.

Secondly, as the trustee is the legal owner of the trust assets, it can be difficult to distinguish the trust assets from personal assets which can cause significant issues if the trustee runs into any financial problems.

And thirdly, what happens when the trustee dies? If an individual trustee dies, the trust assets it is holding will have to be transferred to another legal entity and there could be difficulties in regards to the administration of the trust.

Corporate trustee

In comparison, having a corporate trustee is more expensive to set up in the beginning, as it requires the incorporation of a company. This also means ongoing costs to keep records and accounts for the company. However, all the disadvantages of the individual trustee situation are mitigated by having a corporate trustee.

Firstly, because a company is separate legal identity, it has the benefit of limited liability. This means that, except for exceptional circumstances, for example, fraudulent activity, the directors and shareholders are not personally liable.

Secondly, as the trust assets will be owned by the company, it will be easier to distinguish the trust assets from personal assets of the directors and shareholders.

Thirdly, a corporate trustee does not cease upon the death of an individual director or shareholder, allowing ease of succession.

Conclusion

Despite slightly higher start-up costs, it is generally more advantageous for the business to have a corporate trustee rather than an individual trustee. If you require any assistance in setting up a trust and/or corporate trustee, contact LegalVision today!

Webinars

COVID-19 Vaccines In The Workplace

Thursday 10 February | 11:00 - 11:45am

Online
Can you compel employees to have a COVID-19 vaccine? Understand your rights and responsibilities as an employer. Register today for our free webinar.
Register Now

Preventing Wage Underpayment In Your Franchise

Wednesday 16 February | 11:00 - 11:45am

Online
Learn how to identify and prevent wage underpayment in your franchise. Register today for our free webinar.
Register Now

How to Prevent and Manage Commercial Contract Disputes

Thursday 24 February | 11:00 - 11:45am

Online
Learn how to prevent and manage common commercial contract disputes. Register today for our free webinar.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

Our Awards

  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer