Corporate Trustee v Individual Trustee – Estate Planning Perspective
It is important to understand the structure of a trust when drafting a will to ensure that the day to day control of the trust can continue without significant delay on death of a client.
Generally speaking, the day to day management of a trust is the responsibility of the trustee. Depending on the terms of the trust deed, a trustee may be one or more individuals but more regularly we are seeing Incorporated companies appointed in this role. These companies are known as corporate trustees.
When drafting your will, it is important to understand whether a trust has an individual or corporate trustee structure as this will determine what clauses must be included in the will.
When dealing with an individual trustee, it is important to consider the terms of the trust deed to ensure that it contains provision for the appointment or a replacement trustee on death. In most cases a clause can be inserted into a trustee’s will to directly appoint a replacement on their death.
In cases where we are dealing with a corporate trustee, it is important to consider trust deed but also the terms of the company’s constitution as it the company director(s) that have effective control over the day to day management of the trust. The company constitution contains rules and procedures for the replacement of director(s). When it comes to drafting a will, transferring effective control of the trust is achieved by reference to control of the company rather than the trust itself.
Irrespective of whether we are dealing with an individual or corporate trustee it is also important to identify the appointer of the trust as this is the person who has the power to add or remove the trustee whether they be corporate or individual.
From an estate planning perspective, there are some advantages to having a corporate trustee structure over an individual structure some of which are summarised below:-
- Unlike and individual trustee, the position of corporate trustee does not automatically lapse on death;
- Provided that company constitution allows, the process of transitioning control is relatively simple and cost effective; and
- Avoids the expense and delay of transferring property from the name of one trustee to another (i.e. transfer or real estate);
If you are a trustee, director or appointer and have not updated your will to reflect your position it is essential that you obtain legal advice as a matter of priority. At Williams Barristers & Solicitors, our expert team of wills and estates lawyers are ready and able to assist and we encourage you to contact us to arrange an appointment today.