A trustee company is a legal entity that manages and invests funds on behalf of a beneficiary for their benefit. Arguably, licensed trustee companies are broadening the scope of their traditional activities. This is readily demonstrable by the fact that most trustee companies now provide a mix of personal investment services, fund management services, corporate trustee services and superannuation. Accordingly, there are now a variety of trust companies out there on the market, meaning the right company for you will, therefore, be highly dependent on your own needs and preferences.
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Legal Definition of a Licensed Trustee Company
According to the Corporations Act 2001 (Cth), a trustee company is a company that is:
- a corporation that is a constitutional corporation;
- prescribed by the Corporations Regulations 2001 (Cth) as a trustee company for the purposes of the Corporations Act.
A paramount distinction between a licensed trustee company and an unlicensed trustee company is that the former holds an Australian Financial Services License. This License allows the trustee company to legitimately provide ‘traditional trustee company services’ which will be explored more extensively later on. Essentially, a trustee company must fulfil two conditions before it can be considered to be ‘licensed’:
- Be listed on Schedule 8AA of the Principal Regulations;
- Hold an Australian Financial Services License granted by the Australian Securities and Investments Commission covering the provision of ‘traditional trustee company services’.
Traditional Trustee Company Services vs Estate Management Functions
According to Section 601RAC of the Corporations Act 2001 (Cth), traditional trustee company services include:
- Performing estate management functions
- Preparing a will, a trust instrument, a power of attorney or an agency arrangement
- Applying for probate of a will, applying for a grant of letters of administration, or electing to administer a deceased estate
- Establishing and operating common funds
- Any other services prescribed by regulations
In addition, estate management functions include acting as:
- A trustee of any kind, or otherwise administering or managing a trust. This may also include being a trustee of a discretionary trust.
- Executor or administrator of a deceased estate
- Agent, attorney or nominee
- Receiver, controller or custodian of property
Benefits of Having a Corporate Trustee
The most prominent advantages of choosing a trustee company in substitution for an individual include:
- The company is a legal entity, which has the benefit of indefinite existence. Therefore, you effectively avoid having to appoint a new trustee when your current trustee passes away.
- It may be easier to segregate trust property as the company may have a specialised bank account for managing funds
In Conclusion
It is crucial that you meet with a representative of the trustee company prior to appointment. This is so you can negotiate adequate fee arrangements and have a detailed discussion on how your affairs will be administered. A corporate trustee may have long-term benefits which an individual trustee cannot offer. However, it is worth noting that you may not receive the same personalised touch from a corporate trustee which you would otherwise receive from an individual. Appointing a trustee to control your affairs should always be done with due diligence. As such, it is highly recommended that you consult a Trust Lawyer before engaging with a licensed trustee company.
