Monday, August 2, 2010

Trustee companies multitasking

Last week we touched on the importance of trustee companies not accumulating assets in their own right.

The specific example that inspired last week’s post related to a recent client situation where the trustee company had been used to receive distributions out of the trust that it acted as trustee for.

Often advisers assume that it is not in fact possible at law for a trustee company to also act as the corporate beneficiary. While this is often a good assumption, it is not necessarily the case.

The question of whether a trustee company can in fact be a beneficiary of the trust it acts as trustee for depends on the terms of the trust deed.

Even where a trustee company is listed under the trust deed as a potential beneficiary of the trust that it acts as trustee for, we normally strongly recommend against it being used as a corporate beneficiary.

This is because the trustee is liable for any difficulties that arise against the trust.

It is therefore preferable a completely 'cleanskin' company acts as the corporate beneficiary in order to ensure that the accumulated profits of the trust are quarantined from any litigation against the trustee from time to time.

Until next week.

Matthew Burgess