Advantages of corporate trustee?

[thydzik]

Can someone please let me know the advantages (and disadvantages) of having a discretionary trust with a corporate trustee.

I know it is used to limit the liabilities of the trustee, as well as not have a person as a individual trustee which could easily change.

what are the other advantages?

 

[alexlee]

Succession. You can pass control of the trust by transferring shares in the trustee or pass limited control by electing people as directors.

Corporate trustee survives the death of the individual.

There aren't that many disadvantages, other than cost.

 

[Terry_w]

Many advantages

1. asset protection. Trustee is personally liable for debts of the trust.
2. asset protection. limited liability of the company
3. asset protection. clearly separates ownership
4. estate planning - will the shares of the trustee to the person you want to control the trust after death (don't forget to attend to the appointor role)
5. pass control easily - title remain same but you can change directors of the company and shareholders
6. administration on death or change of ownership is much easier
7. privacy - trust name appears on title (although easy to find out who the director of company is this is an extra step)
8. tax residency can be maintained if you go overseas and become a non resident

etc

 

[Terry_w]

9, finance. say you were trustee and suffered a default and the trust could no longer borrow or access equity. If the trustee was a company you just move out and replace director

 

[thydzik]

Many advantages

1. asset protection. Trustee is personally liable for debts of the trust.
2. asset protection. limited liability of the company
3. asset protection. clearly separates ownership
4. estate planning - will the shares of the trustee to the person you want to control the trust after death (don't forget to attend to the appointor role)
5. pass control easily - title remain same but you can change directors of the company and shareholders
6. administration on death or change of ownership is much easier
7. privacy - trust name appears on title (although easy to find out who the director of company is this is an extra step)
8. tax residency can be maintained if you go overseas and become a non resident

etc

thanks, that is really helpful.

 

[underdev]

- Losses cannot be used to offset personal income

 

[Terry_w]

- Losses cannot be used to offset personal income

This is the case regardless of who the trustee is - individual or company.

 

[Peter_Tersteeg]

If there's not corporate or third party trustee in place in many cases the trustee, primary beneficiary and appointor are all the same person(s).

Is there really a trust in place or is it just a piece of paper trying to hide assets? It can leave you vulnerable.

 

[alexlee]

Asking the question another way, is there any situation where a personal trustee would be better than a corporate trustee?

 

[Paul@PFI]

A Corporate Trustee is also STRONGLY recommended for a unit trust over a human trustee. Some cheap accountants may recommend a human trustee who is the same person as the sole unitholder. Its probably one of the dumbest strategies in tax. Not many accountants (and some lawyers) can hold their hand up and say they understand the concern.

The issue can create a legal concept known as merger. The trust can literally cease to exist and the property considered to vest to the unitholder in the instance where the sole unitholder and trustee are the same person. It might happen tomorrow, 5 years or later ? Stamp duty anyone ? This actually is fairly easy to do with a unit trust especially if nobody knows about the problem. If the Trustee is a company that wont happen.

I generally refuse to establish a trust with a human trustee. SMSF, Disc Trust or UT. Its far from smart.

There is also a very good reason why you dont incorporate any new company in NSW too...Little known but a potential cost saver. Its a hangover to the Consitutional worry that Companys are a state matter...NSW law doesnt match with other states.

 

[Terry_w]

If there's not corporate or third party trustee in place in many cases the trustee, primary beneficiary and appointor are all the same person(s).

Is there really a trust in place or is it just a piece of paper trying to hide assets? It can leave you vulnerable.

This doesn't invalidate a trust! I know of no case law to suggest otherwise. see NSWSC case of Smith from a few years ago.

 

[Terry_w]

Asking the question another way, is there any situation where a personal trustee would be better than a corporate trustee?

Perhaps with finance - it could result in a slightly easier loan application with less fees.

Saves on the ASIC fee of $230 pa.

Can't really think of a reason.

 

[Paul@PFI]

If there's not corporate or third party trustee in place in many cases the trustee, primary beneficiary and appointor are all the same person(s).

Is there really a trust in place or is it just a piece of paper trying to hide assets? It can leave you vulnerable.

Ahh...The "alter ego" decision in "Richstar". Beneficiary, Trustee and Appointor all same..Or Trustee is sole director co. Some Trust Deeds maybe better than others to address this. I use one which has a "controller" who must consent to some Trustee changes to the trust. That appears sufficient to distinguish from the apparent concern.

A good reason why you NEVER DIY online companies and trusts.

 

[Paul@PFI]

Perhaps with finance - it could result in a slightly easier loan application with less fees.

Saves on the ASIC fee of $230 pa.

Can't really think of a reason.

Perhaps may be harder too. Consumer Credit v's Commercial sometimes.
Some lending ties up Trustee Directors credit files and some doesnt This is where a good broker helps.

 

[Peter_Tersteeg]

This doesn't invalidate a trust! I know of no case law to suggest otherwise. see NSWSC case of Smith from a few years ago.

Not saying it's a point of law or that the trust would be invalid but it does have the potential to have questions asked. I think Paul has pointed this out above more effectively.

 

[Terry_w]

Richstar was a case which involved ASIC prosecution and applicaiton for restrainging orders based on the corporations act. This is largely different from the average joe blow going bankrupt. And as far as I can tell the Richstar decision hasn't been followed. The argument was run in Smith but failed despite the dead Dr being the sole director, shareholder appointor and only beneficiary to ever benefit under the trust.

This is an interesting case too btw. Appointor of trust ended up being the LPR which turned out to be the public trustee (or similar). The LPR upon appointment controlled the appointor position. They immediately sacked the existing trustee and put one of their own trustees in so they controlled the trust.

So you have are appointor in a trust have a look at who will be the appointor upon your death. If it says something like the appointor named in the will of the last apppointor or the legal personal representative - then seek legal advice asap!

Otherwise the trust can fall into the wrong hands at death