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A trust is a legal structure that allows one or more people (or companies) to manage property for somebody else’s benefit. A necessary element of a trust is that it must have a trustee. This article explores trustees in detail, including their role, who can be a trustee, their appointment, and the types of trustees available.
What Does a Trustee Do?
A trustee is the legal owner of the trust property and is responsible for administering the trust’s property and income for the benefit of the trust’s beneficiaries.
Examples of assets that a trustee can hold legal title to include the following:
- shares in a company;
- money; and
- intellectual property.
Who Can Be a Trustee?
Anyone who can own property can be a trustee, including individuals and companies.
A beneficiary of a trust can also be a trustee. However, if there is only one beneficiary of a trust, that beneficiary cannot also be the trustee of that trust.
How are Trustees Appointed?
You can appoint trustees in one of three ways:
- Trust deed: generally, a trust deed names the person or persons who are to act as trustee(s) of the trust. A trust deed will also typically contain a provision explaining how a trustee will be appointed. If a will establishes a trust, then it will serve as the relevant trust deed.
- Statutory power: if there are no specific provisions in the trust instrument for appointing trustees, there are default provisions in legislation within each State and Territory of Australia outlining the appointment of a trustee.
- Courts: A court can appoint a trustee.
Difference Between Individual vs Corporate Trustees
There are two types of trustees:
- an individual trustee; or
- a corporate trustee.
An individual can act in their personal capacity as a trustee of a trust. Two or more individuals can also be appointed joint trustees of a trust. The main advantage of having an individual trustee instead of a corporate trustee is reduced costs and complexity, as there is no need to incorporate a company.
Alternatively, it is common practice to incorporate a company to act as a corporate trustee for a trust. The main benefits of appointing a corporate trustee include the following:
- ease of succession: companies can exist indefinitely, unlike an individual trustee. A corporate trustee does not end upon the death of one of its directors or shareholders. Conversely, in the case of an individual trustee, the legal ownership of the trust’s assets must be transferred to another entity when the individual trustee passes away;
- asset protection: the corporate trustee will be a shell company whose sole purpose is to act as a trustee. It should not be exposed to any liability, and therefore, the business assets (which will be owned by the trustee on behalf of the trust) should be safe;
- separation of personal assets from trust assets: it is easier for a corporate trustee to keep trust assets separate from personal assets as they are held in a different name; and
- limited liability: as a company is a separate legal entity, a court cannot hold its shareholders personally liable (unless there are exceptional circumstances, for example, fraud).
Types of Trustees
Additionally, depending on the type of trust, there can be several different types of trustees.
| Type of Trustee | Explanation |
| Public trustee | The Public Trustee is a statutory authority that undertakes a number of public functions. Functions include administering wills, small estates or estates for the mentally incapable and providing trustee, financial management and other specialist services to the public. |
| Trustee companies | A trustee company invests and manages funds on behalf of its clients. |
| Bare trustees | A bare trustee is a person who holds trust property for the benefit of another with legal capacity. A bare trustee has no interest in the property aside from the bare legal title and does not have any further duties to perform. |
| Custodian trustees | A custodian trustee holds trust property. However, the management of the trust property and exercising all powers and discretions under the trust will remain vested in the managing trustee, not the custodian trustee. |
| Advisory trustees | An advisory trustee does not have property interests vested in it. Rather, their role is to advise other trustees on the management and administration of trust property. |
The difference between a company and a company that only acts as a trustee is that a trustee company is the legal, but not beneficial, owner of the assets of the trust. The company’s assets are held on trust for the benefit of the trust’s beneficiaries, not the company in its own right.
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Key Takeaways
A trustee is the legal owner of the trust property and is responsible for administering the trust property for the benefit of the trust’s beneficiaries. There are various ways to appoint a trustee, such as by trust deed, statute or a court ruling. Likewise, there are different types of trustees, such as individual or corporate trustees.
A trustee is the legal owner of the trust property and is responsible for administering the trust’s property and income for the benefit of the trust’s beneficiaries.
Anyone who can own property can be a trustee, including individuals and companies.
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