Alex O'Brien
Retirement Income

What is a trustee?

In its broadest sense, a trustee can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another. Although the strictest sense of the term is the holder of property on behalf of a beneficiary, the broader sense includes people who serve, for example, on the Board of Trustees for an institution that operates for the benefit of the general public.

An executor of a will, charged with carrying out the wishes of a person after they die, may also find that includes taking on the role of trustee, for example, for children or grandchildren. A beneficiary can act as a trustee, however a sole beneficiary cannot carry out such a role.

Types of trusts – Trusts may be created for a variety of reasons such as tax-effective estate planning or to provide ongoing support for a beneficiary, or benefit a charity. Alternatively, trusts may be set up as result of awards made by the Courts.

There are several different types of trusts with each having a particular purpose:

Children’s trusts – These are generally created in wills and are administered for children until they reach the age of 18 or older as determined by the provisions of the will. These trusts can be created to take effect if one or both parents die, and can help to prove tax-effective income to the children. 

Trusts for beneficiaries with a disability – These trusts are administered for the lifetime of someone who cannot manage their own affairs. Benefit is the key word and the trustee has to be sympathetic to all needs, yet maintain investment security.

Life estates – These trusts are set up to provide accommodation and/or an income stream for the lifetime of a close friend or relative. They are often used by people who have remarried and want to provide ultimate ownership of assets to their children rather than their spouse.

Discretionary testamentary trusts – These are created by a will, and give the trustee the discretion to split the income between a family group for a period of time. Ultimately the assets are given outright to these people. Although changes in taxation laws may have an impact on these trusts, they are currently tax-effective because the trustee can vary the income paid depending on how much other income the beneficiary receives.

Charitable trusts – You may wish to provide long term income benefit to a charity such as for a scholarship or medical research, rather than giving an immediate gift.

Appointing a trustee – Trustees can be appointed via the express terms of a trust instrument, statute, or by the courts. Many people appoint a friend or relative as their executor and/or trustee. You need to keep in mind that this is an important personal responsibility that can be time-consuming, challenging and require considered and complex decision-making.

As such it can also be worthwhile looking at appointing a professional trustee with the expertise, experience and independence to provide these services for you.

Tags:
Trustee, superannuation, money, retirement