It depends – Should the appointor of my family trust be a company?

In this edition of ‘It depends’, senior associate Steven Jell talks about using a company as the appointor of your family trust.

VIDEO TRANSCRIPT

Hi, welcome to another edition of It depends. Today, we’re going to talk about using a company as the appointor of your family trust.

What is an appointor?

Most discretionary trust deeds will include terms that create a role that give a person the power to change the trustee. In our trust deeds we call that role the ‘appointor’. However, there are a number of other terms used in the marketplace, including ‘protector’, ‘principal’ or ‘guardian’. While the name is slightly different, the roles are generally the same.

Do I need an appointor for my trust?

So, the short answer is no, there’s no necessity for having the role of appointor in a family trust. So, the trustee has the day-to-day operational control for the trust, which includes buying and selling assets and using the assets and income of the trust for the benefit of certain beneficiaries. The appointor is the person who has the power to change the trustee. So, if a trustee is not doing the things that an appointor expects that they will do, then the appointor has the power to remove that person or company and appoint a replacement.

Can I have a company act as appointor of my trust?

So, it depends. The role of an appointor is a role created under the trust deed itself. So, if the trust deed includes terms that allow a company to act as appointor, then yes, a company can act as appointor of a family trust.

Should I have a company act as the appointor of my trust?

So, it depends. There are really strong arguments for using a company to act as trustee of the family trust. But those arguments are less persuasive when we look at using a company to act as appointor of the trust. Unlike a trustee, an appointor does not hold any assets, so there’s no administrative benefits to having a company act as appointor, and the role of the appointor is a role that is quite easily changed and updated as the need requires. If we have a company acting as the appointor of the trust, then there’s a need for the company to be established, registered with ASIC, and maintained on an ongoing basis, even if the role is largely dormant. Generally, a corporate appointor will only be useful where we have complex ongoing control arrangements, where control of the trust is being transferred to multiple people or through multiple generations. A simpler strategy is often to remove the role of the appointor entirely and allow the ongoing control of the trust to be determined by whoever controls the trustee.

If you or one of your clients have questions regarding the ongoing control of a discretionary trust, please feel free to reach out to me or one of the team. Thank you for watching this edition of It depends.