Superannuation Trusts must have a Trustee. But should the Trustee be a company or an individual? This question is important for asset protection and succession planning.
In the table below we outline the key differences between corporate & individual trustees.
|Corporate trustee||Individual trustee|
|Estate planning flexibility|
A company offers greater flexibility for estate planning as the trustee does not change as a result of the death of a member.
|Extra administration and costs|
The death of a member gives rise to considerable administrative work and costs at an inopportune time
The administrative penalty regime that commenced from 1 July 2014 typically only applies to a company once for each contravention.
A penalty can be imposed from 1 July 2014 on each individual trustee for each contravention. Thus having two individuals trustees can double the administrative penalty that would otherwise apply to a corporate trustee.
|Sole member SMSF|
You can have an SMSF where one individual is both the sole member and the sole director
|Sole member SMSF|
A sole member SMSF must have two individual trustees.
On the admission or cessation of membership, that person becomes or ceases to be a director of the company. Thus the tutle to all assets remains in the company’s name.
|Extra and costly paperwork|
The admission or cessation of a member requires that person to become or cease to be an individual trustee. As trust assets must be held in all trustees’ names, the title to all assets is to be transferred to the new trustees.
A company has an indefinite lifespan; in other words, it cannot die. A company makes succession to control more certain on death or incapacity.
|Ceases upon death|
Timely action must be taken on death to ensure the trustee/member rules are satisfied. (SMSF rules do not allow a sole individual trustee/member SMSF)
|Greater asset protection|
As companies have limited liability, they provide greater protection where a party sues the trustee for damages.
|Less asset protection|
If an individual trustee suffers any liability, the trustee’s personal assets are also exposed.
Contact our office today on 03 9727 6700 if you would like to discuss your situation.
This document contains general advice only and is prepared without taking into account your particular objectives, financial circumstances and needs. The information provided is not a substitute for legal, tax and financial product advice. Before making any decision based on this information, you should speak to a licensed financial advisor who should assess its relevance to your individual circumstances. While The Field Group believes the information is accurate, no warranty is given as to its accuracy and persons who rely on this information do so at their own risk. The information provided in this bulletin is not considered financial product advice for the purposes of the corporations Act 2001.