A trust is not a legal entity in itself and cannot own property. Instead a trust describes a relationship between various parties whereby a trustee or trustees (the legal owner) hold trust property on behalf of beneficiaries (the beneficial owner(s)). In the context of a unit trust, the trustee holds the trust property on behalf of the unit holders. The income and distributions of the trust are split between the unit holders according to the units held.
A corporate trustee has several advantages over an individual trustee:
A corporate trustee, being a separate legal entity, can exist indefinitely, whereas individual trustees will eventually die, may become incapacitated, or may want out for another reason.
Legal ownership of the trust assets
Assets in a trust are held in the name of the Trustee on behalf of the trust. If individuals act as the trustee of your trust and you later want to change the trustee, you will have to change the legal owner of your trust’s assets. Conversely, you can simply change the shareholders and directors of a corporate trustee which will not change the legal owner of the trust’s assets.
Asset protection & limited liability
Individual trustees can be personally liable for any loans taken out or liabilities that the trust may incur. If a corporate trustee is used, liability will generally be limited to the assets of the trustee company itself.
These are two totally different things – a trust is an arrangement between 2 or more parties. It is a set of responsibilities that are imposed on a nominated party (the trustee) to hold assets on behalf of another party. A company is a legal entity registered with ASIC, that exists separately from its owners (its shareholders). A company’s status as a separate legal entity gives it the same rights as a natural person, meaning it can be sued, is liable for debts and it can sue another entity.
A Trust must vest (be wound up and its assets distributed) within 80 years of being set up (except in South Australia where the Law relating to perpetuities does not apply). The Patricia Holdings Trust deed provides for the Trust to have a maximum life of 79 years. A Trust can be wound up at any time within the 79 years.
The Trustee must have an Australian address as they have Governance responsibility for the Trust and therefore need to be accessible to the Legal Jurisdiction under which they operate. The state or territory of Jurisdiction can be nominated, but should the Trust be subject to legal proceedings, this is only one of the factors that will be taken into account when determining the appropriate Jurisdiction for the action.
Any individual, company, or incorporated association can be a Trustee provided that the person or directors are not bankrupt, minors, or disqualified persons.
Much like holding shares in a company, as a Trust is not a legal entity, it cannot be named as the beneficiary. Instead, it should be listed as the Trustee of the Unit Holding Trust “as trustee for” the Trust
A Trustee winds up a Trust by:
- making a Declaration (in writing) that the Trust is to vest (that is the Trust ends and the Trust assets be distributed to the Unit Holders);
- collecting in all of the Trust assets and converting them into cash (unless the Trustee proposes to make an in specie distribution);
- all debts of the Trust must be paid and all tax must be paid;
- The assets (or cash) are then distributed amongst the Unit Holders according to the Unit Holdings in the Unit Trust Deed;
- notice is then given to the Taxation Department that the Trust has ceased to exist.
Yes, every Trust must have a Trustee. This is because the law requires that for a Trust to exist there must firstly be some Trust property and secondly, it is the Trustee (or Trustees) who hold the Trust property on Trust for a Beneficiary or Beneficiaries (there must be a separation between the legal and equitable ownership). A Trust is not considered a legal entity.
Patricia Holdings can help change the name of your Trust. The Trustee elects to change the name of the Trust and then confirms that election in writing. A Trustee must ensure that if a Trust changes its name that every person who has business dealings with the Trust and every Nominated Beneficiary of the Trust are notified of the change of name. We can provide all the paperwork required for $187 delivered as a PDF or $220 for printed and couriered documents.
In a Unit Trust, the Trustee issues units to the Beneficiaries of the trust assets. There can be as few as one unit issued in a Unit Trust although, to avoid the possibility of a Unit Trust being deemed to be a Fixed Trust, there should be at least two units issued.