As with most legal questions, whether it’s better for you to own equity in your company (shares) through a corporate trustee or an individual trustee (i.e. a natural person) depends on your situation. This article assumes you have already set up a discretionary trust and looks at the advantages of a corporate trustee as well as when you can be the trustee of your trust.

What is a Discretionary Trust?

A discretionary trust is a legal arrangement for one entity to hold assets on behalf of another entity. The key roles are settlor, appointee, trustee and beneficiary.

  • Settlor: The person who creates the trust by ‘settling’ a sum of money (usually a minimal amount, e.g. $10) or property for the beneficiaries.
  • Appointee: This is the person ‘appointed’ to hold the discretion to appoint or remove the trustee.
  • Trustee: The person or entity which holds trust assets/property in its own name and holds it for the benefit of the beneficiaries. A trustee can be a natural person or a company (e.g. a Pty Ltd company).
  • Beneficiary: Beneficiaries can be natural persons or companies. The trustee holds assets for the benefit of the beneficiaries, e.g. to pay dividends from an investment or rent from an investment property.

Corporate Trustees

Distinguishing Between Trust Assets and Personal Assets

Corporate trustees are advantageous for managing trust assets as it is easier to distinguish between trust assets and personal assets. For example, ‘Jane Smith’s Trust’ is on the title deeds for House 1 and ‘Jane Smith’ is on the title deed for House 2, so it’s easier to distinguish which entity owns which asset. Accountants can then more easily distinguish the income from the assets.

Limited Liability 

Trustees are personally liable for debts of the trust. If the trust takes out a loan and there are insufficient funds to repay the loan, the trustee must use its own funds to satisfy the debt. If the trustee has no assets or funds to satisfy the debt, a debtor cannot reach behind the trustee to access personal assets such as a person’s home or car.

Individual Trustees

Distinguishing Between Trust Assets and Personal Assets

If an individual trustee is used, it’s harder to tell the difference between assets of a trust and those owned by the individual. If Jane Smith is the trustee of a trust and she owns a house, then ‘Jane Smith’ is on the title deeds of House 1 (trust asset) and is on the title deeds for House 2 (her personal assets). This might be problematic for accounting and financial purposes, and if the trust cannot repay a debt, a debtor might argue that personal assets could be used to satisfy the debts of the trust.

Limited Liability

As already mentioned, trustees are personally liable to satisfy the debts of a trust. If the trust gets into debt and cannot repay, the trustee’s personal assets may need to be used to satisfy the debts. This can pose a significant risk to a trustee and advice should be sought.

Succession Planning

Corporate trustees have advantages over individual trustees for succession planning purposes. If an individual trustee dies, then assets the trustee held must be transferred to another entity. This can be messy, as the person’s estate will likely be being distributed at the same time. Alternatively, a corporate trustee does not die. If a director of the corporate trustee passes away, then they can be replaced easily, but there is no need to transfer assets from the trustee to another entity.

Key Takeaways

Whether it’s more appropriate for you to use a corporate trustee or an individual trustee for your discretionary trust depends entirely on your situation and personal and business circumstances. The key advantages and disadvantages described above are designed to provide a base for you to be able to conduct further research into whether you should set up a corporate trustee or go with the inherent simplicity of using an individual as the trustee. As there are tax consequences involved with trusts, you should also seek advice from your trusted financial professional.


Questions? Get in touch with our business structuring team on 1300 544 755.

COVID-19 Business Survey
LegalVision is conducting a survey on the impact of COVID-19 for businesses across Australia. The survey takes 2 minutes to complete and all responses are anonymous. We would appreciate your input. Take the survey now.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. For just $199 per month, membership unlocks unlimited lawyer consultations, faster turnaround times, free legal templates and members-only discounts.

Learn more about LVConnect

Chloe Sevil
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.

  • By submitting this form, you agree to receive emails from LegalVision and can unsubscribe at any time. See our full Privacy Policy.
  • This field is for validation purposes and should be left unchanged.
Our Awards
  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2019 NewLaw Firm of the Year - Australian Law Awards 2019 NewLaw Firm of the Year - Australian Law Awards
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer
Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at

View Privacy Policy