Changing the trustee of your family trust can trigger a range of issues – so many, in fact, that partner Scott Hay-Bartlem has produced a series of six ‘It Depends’ videos to cover the tricks and traps for advisers and their clients.
In the fourth video in the series, Scott talks about asset location and how that may affect your family trust.
Welcome to this edition of It depends where we’re talking about ‘should I change the trustee of my family trust?’
Should I change the trustee of my family trust?
This is the ‘It depends’ just to start off with. In this edition, I’m going to look at where the assets are and how that might affect your change of trustee.
What happens with the assets if I change my trustee?
So, when you change a trustee of a family trust, you’re actually moving all the assets from the old trustee to the new trustee. There are some duty issues we’ll cover in a separate ‘It depends’, but that means you actually need to move the title of the assets from old trustee to new trustee. Now, for things like bank accounts, often the bank is happy. You take a change of trustee document down to them, they will do that. For assets where you have titles and registrations like, for example, land, you will need to go through a formal transfer process from the old trustee to the new trustee, and that can involve more complexity and cost. So, before we change the trustee, we should think about those kinds of issues and what the cost and the hassle is likely to be.
What about a trust that carries on a business?
So, where your trust carries on a business, it’s even more complicated because you will need to talk to your trade creditors and organise often new lines of credit. You’ll need to talk to the bank about the overdraft. They may want new documents, they might want new credit checks. We may need to look at PPSR registrations and all that kind of stuff. Registrations for WorkCover and ATO and PAYG and payroll tax, all those kind of things will also have to be updated. So, before we go ahead and actually push the button on the change of trustee, tidying up all those things is going to have to be on your radar to consider whether it’s actually all worthwhile or not.
So, this is one of a number of issues we have when thinking about changing a trustee. We’ve got a number of it depends that covers off on other versions of this as well. So, thanks for watching this edition of It depends.