Corporate Trustee vs Individual Trustee: Which is Right for Your Trust in 2025?

What is a trust? Why do I need one? What is the difference between a corporate and individual trustee and why might one be preferred over the other?

Understanding trusts and how to effectively structure them can be a challenging process. If you would like to establish a trust, we recommend having a thorough understanding of what a trust is, the difference between a corporate trustee and an individual trustee and your ongoing compliance obligations before getting started.

What is a trust?

A trust is a legal relationship whereby an individual, individuals or corporate entity (known as a trustee or trustees) hold title to and manage property or assets (the trust property) for the benefit of one or more beneficiaries as governed by the terms of the Trust Deed.

Key Terms in Trust Structures

• Corporate Trustee: A company registered (often with ASIC in Australia) that acts as the legal trustee. It is a separate legal entity and commonly used for family trusts and SMSFs.
• Individual Trustee: A natural person who manages trust assets. They are personally liable for the trust’s obligations.
• Trustee Company in Australia: A corporate entity established under Australian law to administer a trust.
• Trust Deed: The legal document that governs the rules, management and distribution of the trust.
• Shareholder of Trustee Company: Holds control through the ability to appoint or remove directors, influencing trust decisions.

Trustee — who and why?

The trustee of a trust is either an individual person or persons or a company that legally holds title to the trust’s assets for the benefit of the beneficiaries of the trust. The trustee is obliged to act in the best interests of the beneficiaries in accordance with the terms of the Trust Deed.

What is a Corporate Trustee?

A corporate trustee is a company specifically established to act as trustee for a trust. As a separate legal entity, a corporate trustee company holds legal ownership of trust assets without commingling them with personal property. Unlike an individual, a corporate trustee structure provides perpetual existence and clearer asset protection.

In Australia, a corporate trustee is typically registered as an Australian company with ASIC, assigned an Australian Company Number (ACN). These are often established as special purpose companies with limited activities and focused solely on their trustee responsibilities. While they maintain separate legal status, many corporate trustee companies operate as “shell” entities with minimal assets of their own.

A corporate trustee must have at least one shareholder and appoint directors who are responsible for making decisions regarding trust asset management and distribution to beneficiaries. Determining who should be shareholder of the trustee company is a critical decision that influences trust control. The shareholders ultimately control the trust by having the power to appoint and remove directors.

For specialized trusts like Self-Managed Super Funds (SMSFs), a corporate trustee structure offers particular advantages over individual trustee arrangements, especially for single member funds where regulatory compliance becomes more streamlined under corporate management.

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Corporate Trustee in Australia – Structure and Legal Setup

To create a corporate trustee in Australia you must:

• Register a company with ASIC and obtain an ACN
• Appoint at least one director
• Assign shareholders (who hold ultimate control)
• Ensure the company complies with both the Corporations Act and trust law

What is the role of a corporate trustee?

A corporate trustee manages and administers a trust’s assets on behalf of its beneficiaries, ensuring compliance with the trust’s terms. Its role includes fiduciary duties such as safeguarding assets, making unbiased decisions, maintaining records, and distributing assets appropriately. Corporate trustees provide professional expertise, continuity, and liability protection.

Benefits of Corporate Trustee:

The main benefits of having a corporate trustee in place are asset protection and limited liability. These are explained as follows:

1. Limited Liability Protection: Trustees are personally liable for the trust’s liabilities. A corporate trustee limits this liability to corporate assets (being the trust’s assets rather than the trustee’s personal assets).
2. Asset Protection: A corporate trustee creates a clear separation between personal and trust assets. This reduces the risk that trust assets could be construed as an individual trustee’s personal property should the individual face legal action.
3. Perpetual Existence: Corporate trustees exist indefinitely, avoiding complications related to an individual trustee’s death or incapacity. This creates certainty around legal ownership of trust assets across generations.
4. Clear Control Structure: The shareholders of the corporate trustee control the trust by appointing directors of the corporate trustee company, creating a transparent governance framework.
5. Professional Management: Corporate trustee arrangements often bring specialized expertise to trust administration, ensuring proper compliance with legal and tax requirements.
6. Simplified Administration: For trusts like SMSFs, having a corporate trustee can simplify record-keeping, asset registration, and compliance obligations compared to individual trustee structures.

Disadvantage of Corporate Trustee

Conversely, the disadvantages of having a corporate trustee include:

1. Higher Setup Costs: The increased setup and management costs associated with incorporating a company.
2. Ongoing Compliance: Requirements for corporate record-keeping and potential directors’ fees.
3. Additional Regulatory Obligations: Corporate trustees must comply with both trust law and corporations law requirements.

Why Have a Corporate Trustee for a Family Trust?

A corporate trustee offers several advantages for managing a family trust. Here’s why it might be the best choice:

1. Limited Liability

Corporate trustees ensure that the personal assets of individuals (directors or shareholders) are not at risk for the trust’s liabilities, offering an additional layer of financial protection.

2. Clear Asset Protection

Having a corporate trustee separates personal assets from trust assets, reducing risks such as personal legal disputes affecting the trust’s property.

3. Continuity Across Generations

Unlike individual trustees, corporate trustees provide perpetual existence. This eliminates disruptions caused by individual trustees’ death, incapacity, or resignation, ensuring the trust’s long-term stability.

4. Professional Expertise

Corporate trustees bring specialized knowledge in financial management, legal compliance, and trust administration. Their professional oversight helps avoid costly mistakes and ensures the trust is managed effectively and under all relevant laws.

5. Unbiased Decision-Making

As an impartial entity, a corporate trustee can make unbiased decisions, reducing family disputes and ensuring fair treatment of all beneficiaries.

6. Simplified Succession Planning

A corporate trustee negates the need for complex changes or appointments when individual trustees pass away or step down, simplifying trust management over time.

Choosing a corporate trustee can enhance the professionalism, continuity, and protection of your family trust, safeguarding your assets for future generations.

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What is an Individual Trustee?

An individual trustee is a natural person appointed to manage trust assets and fulfill trustee responsibilities. Unlike a corporate trustee, an individual trustee does not operate as a separate legal entity but carries personal responsibility for trust administration.

Individual trustees can be family members, friends, or trusted advisors who agree to take on fiduciary responsibilities. In structures like Self-Managed Super Funds (SMSFs), regulations specify who can be a trustee of a SMSF, generally requiring all fund members to be trustees or directors of a corporate trustee.

When considering if an individual can be a trustee of a trust, the answer is generally yes, provided they meet legal capacity requirements and aren’t disqualified by law. However, different trust types may have specific requirements about who can serve in this role.

Benefits of Individual Trustee:

1. Simplicity and Lower Costs: The primary advantages of appointing an individual trustee include an uncomplicated and inexpensive setup process with no company registration fees.
2. Lower Ongoing Expenses: Individual trustees generally face lower ongoing management costs without corporate compliance requirements.
3. Direct Control: For small family trusts, having family members as individual trustees can provide direct and personal oversight of trust assets.
4. Fewer Formal Requirements: Individual trustees typically have fewer administrative and reporting obligations compared to corporate entities.

Disadvantages of Individual Trustee:

1. Personal Liability: Individual trustees bear personal liability for trust obligations, potentially putting their personal assets at risk.
2. Asset Confusion: There can be difficulty distinguishing between personal and trust assets, especially for SMSF individual trustee arrangements.
3. Succession Challenges: Succession planning and determining legal ownership of assets can become problematic upon an individual trustee’s death or incapacity.
4. Administrative Complexity: When trust assets are held by individual trustees, each change in trusteeship requires updating asset ownership records across multiple institutions.
5. Limited Lifespan: Unlike a corporate structure, individual trustees have finite lifespans, necessitating eventual replacement and potential disruption.

For SMSF individual trustee arrangements specifically, the regulatory burden increases, as all members must be trustees and vice versa, complicating administration for growing families or single member funds.

Corporate vs Individual Trustee – Key Differences Table

Which one do I choose and what if I get it wrong?

Deciding whether to establish individual or corporate trustee structures can be challenging and should be assessed case-by-case, considering factors like:

• Trust purpose and anticipated longevity
• Value and complexity of trust assets
• Risk profile and liability concerns
• Cost sensitivity and administrative capacity
• Succession planning requirements

At The Gild Group, we recommend seeking professional advice to ensure the right trustee structure is implemented for your specific circumstances. Our team specializes in tailoring solutions for various trust types, from family trusts to SMSFs, ensuring your structure supports your long-term financial goals.

… and don’t stress. If you get it wrong, we can assist you to prepare a Deed of Retirement/Removal and Appointment to retire or remove the current trustee and replace them with a new trustee (as governed by the terms of your Trust Deed).

For comprehensive advice on tax implications of different trustee structures, visit our tax services page. If you’re exploring trusts as part of broader wealth or succession planning, our resources on international tax structuring, Australian inheritance tax, and gift tax considerations may provide valuable insights.

For more info please get in touch with our expert team here. 

Frequently Asked Questions about Corporate vs Individual Trustee

Q: What is the difference between a corporate and individual trustee?
A: A corporate trustee is a company that manages trust assets, while an individual trustee is a natural person. Corporate trustees offer limited liability and perpetual existence.

Q: Who should be shareholder of the trustee company?
A: Ideally, key decision-makers or controllers of the trust should hold shares, as shareholders can appoint or remove directors.

Q: Can an individual be a trustee of a SMSF?
A: Yes, if they are a member of the fund and meet legal eligibility criteria.

Q: What is a trustee company in Australia?
A: A company registered with ASIC to act solely as a trustee for a trust. It must comply with both corporations and trust law.

Q: What’s the difference between a trust and a company?
A: A trust is a legal relationship managed by a trustee, whereas a company is a separate legal entity that conducts business.

This publication is intended for information purposes only and should not be regarded as financial or legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as financial or legal advice.  If there are any issues you would like us to advise you on arising from this publication, please let us know.