Thinking About Setting Up a Trust?

When setting up a discretionary (family) trust, one of the key decisions you’ll make is who will act as the trustee. The trustee is the legal controller of the trust, responsible for administering it, managing its assets, and making decisions on distributions.

You generally have two options:
✅ An individual trustee (usually a person or group of people)
✅ A corporate trustee (a company specifically set up to act as trustee)

While both options are valid, in most cases, especially for business owners or investors, a corporate trustee is the smarter long-term move. Let’s dive into why.

💼 What Is a Corporate Trustee?

A corporate trustee is a company that acts as the trustee of a trust. It’s usually a special purpose company, meaning it doesn’t do anything else besides hold and manage assets on behalf of the trust.

Instead of the trust being in the name of “John Smith as trustee for The Smith Family Trust”, it would be “Smith Holdings Pty Ltd as trustee for The Smith Family Trust”.

🛡️ Benefit 1: Better Asset Protection

One of the biggest reasons to choose a corporate trustee is protection of personal assets.

Individual Trustee Risk:

If you use an individual as the trustee and the trust is sued or goes into debt, the individual trustee could be personally liable if they didn’t act in accordance with trust rules, even if they weren’t at fault.

Corporate Trustee Advantage:

When a company acts as trustee, only the company’s assets are at risk, not the personal assets of the directors or shareholders (so long as there’s no personal guarantee or misconduct). It adds a layer of protection between your personal wealth and the trust’s activities.

This is especially important in:

• Trading trusts, where the trust is running a business

• Property development or commercial property holding trusts, where significant liabilities may exist

🧾 Benefit 2: Simplifies Estate Planning

When individual trustees pass away, become incapacitated, or wish to step back, it can trigger:

• Legal and administrative headaches

• The need to formally change the trustee, which may involve updating property titles, bank accounts, and trust deeds

• Unintended tax consequences or delays in trust control

Corporate Trustee Advantage:

The company doesn’t “die”, it just continues on with new directors. That means:

• Control of the trust can easily be passed on by changing the director(s) of the company

• No need to update asset ownership records because the trustee (the company) hasn’t changed

• Far cleaner and easier succession planning

In estate planning, the question is: do you want your kids to take over as trustee? If yes, a corporate trustee gives you the flexibility to do that seamlessly.

🔍 Comparing Trust Use Cases: When Does It Matter More?

Let’s break down how this choice plays out in different trust scenarios.

1. Trading Trust (Running a Business)

This is where the trust is actively trading and taking on risk, like a clinic, cafe, or online store.

• Corporate trustee highly recommended

• Why? You’re exposed to risk from clients, suppliers, contracts, employees. You don’t want your personal name on the line.

2. Commercial Property Holding Trust

The trust owns one or more commercial properties and often enters into leasing arrangements.

• Corporate trustee strongly recommended

• Why? There’s risk in owning commercial assets, plus asset protection and estate planning are key here.

3. Passive Investment Trust (e.g. Shares or ETFs)

The trust is holding shares, managed funds, or long-term passive assets.

• Corporate trustee is still recommended, but slightly less critical

• Why? There’s less operational risk, but you still benefit from estate planning and keeping personal assets separate from the trust

💰 What’s the Cost?

A corporate trustee does come with:

• Company Setup costs

• Annual ASIC review fee

While it’s more expensive up front compared to using individuals, the long-term benefits may be worth the cost, especially when you consider potential risks, restructuring, and estate complications.

👥 What If You Already Have an Individual Trustee?

You’re not stuck. It’s possible to transition from an individual trustee to a corporate trustee later on, though it can involve:

• Amending your trust deed

• Transferring legal ownership of trust assets like titles or bank accounts

It’s better to get it right at the start, but if you’re mid-way through and considering a change, chat with your accountant or advisor about your options.

✅ The Bottom Line

Using a corporate trustee is generally the preferred option for most discretionary trusts, especially if:

• You run a business through the trust

• You hold valuable assets like commercial property

• You want smooth succession and better estate planning

• You value asset protection and keeping your personal wealth separate

We hope you’re enjoying our blog, just a note though. The information provided here is intended for general informational and educational purposes only. While we aim for accuracy, we can’t guarantee that this content will apply to your specific situation, every business owner’s circumstances are unique.

This blog is not a substitute for personalized advice from a qualified accountant, tax advisor, or any other professional. If you have questions specific to your individual circumstances, we strongly recommend consulting a professional for tailored advice.