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Trust and Corporate Trustee Bank accounts

Discussion in 'Finance & Banking' started by DaveA, 11th May, 2007.

  1. DaveA

    DaveA Well-Known Member

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    If i set up a trust and corp trustee, do i need seperate bank accounts, or just seperate sub accounts. Ie can i set up one member number (owned by either the trust or the company) and the have 2 accounts attached to the number, one for each thing?

    If not how do people run there trust bank accounts, also which companies are you using (CBA, Westpac?) as i asked my credit union and they didnt really know...

    Thanks guys
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    The corporate trustee runs a bank account "as trustee for" the trust.

    You would open a bank account in the name of:

    "Your_Trustee_Name Pty Ltd As Trustee For Your_Trust_Name"

    eg: "Sim Holdings P/L ATF Sim Trust No. 6"

    The trustee company doesn't generally need its own accounts (separate to the trust accounts), unless it is also a trading company, which isn't recommended.

    You should really ask your accountant for info on how to set all this up ... it's important to get it right.

    I use a NAB business cheque account and all my trust transactions go through that one account.
     
  3. DaveA

    DaveA Well-Known Member

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    i was guessing its pretty important so thats y i want to have some idea about it when he talks to me...

    why do you say a corp trustee doesnt need its own account? is that just because the trust makes payments on behalf of the corp trustee? so hence there is not a lot of point...

    any reason you chose nab? you do your personal banking with them? had the best features? Would it be worth it setting up the account with the same person who you use margin lending with as well to make transactions a bit quicker???

    Apart from the a cheque book and internet access, what else is neeeded? ATM card?
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    You need to understand that a trust isn't a separate entity ... it is what's called a "legal fiction" (it only exists in the minds of lawyers :eek: ).

    A trust requires a trustee to operate things on its behalf. This is usually either a company or an individual - in your case, you are looking at using a company for the trustee (which is what I do).

    The trustee company is effectively just a shell company which does nothing more than act as a trustee. It holds no assets, it does not trade, and most importantly, it does not put itself at risk (if it did, the assets it looks after may also be at risk). As such, because the trustee company does nothing, it doesn't need its own bank account (beyond that which it operates in its capacity as trustee).

    The trust doesn't have a bank account - the trust doesn't exist. The trustee has a bank account which it operates "in trust" for the beneficiaries.

    It takes a bit to get your head around ... but remember, the trustee does all the work but doesn't own anything itself - the trust does. The trust doesn't exist, so it can't do anything without the trustee - hence, the trust doesn't actually do anything.

    Come tax time you will get a tax return for the trust (!!!), and a set of financial reports for the trustee company (which don't say anything, since it didn't actually do anything). Just to confuse things more :D

    It might help to think about it this way: trusts are only about ownership ... a trust is used to designate who the beneficiaries of an asset is. The trustee company holds the assets in trust for those beneficiaries. In most situations you only deal with the trustee company - except when buying assets, at which time you designate that the asset is held in trust by the trustee company.

    Of course, there is nothing stopping you from having the trustee company do it's own thing like a normal company would ... including running a business or owning assets, but it's strongly not recommended ... the trustee company should do nothing more than run the trust.

    (PS. none of this is advice - I am not a solicitor or accountant, this is just my understanding based on what I've learned from my own accountants).

    Bank accounts don't matter that much in the grand scheme of things ... I suggest you choose a company which gives good customer service.

    I guess there is merit in using the same bank as your margin lender, but it may not necessarily help ... depends on how the bank accounts and margin accounts are run.

    Cheque book and internet access is all I have ... you wouldn't need an ATM card unless you would be making cash transactions directly from the trust - which I don't recommend (paper trail is important).

    Cash transactions and credit card transactions I do all myself and then submit an expense claim to my trust regularly to have it reimburse me for the expenses I've paid on its behalf.
     
  5. DaveA

    DaveA Well-Known Member

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    thanks for the post sim, im starting to get my head around it a bit more, i understand the things like why there important and who should use them, but im still learning on how they run day to day.... there seems to be no books on the day to day stuff to help me learn...


    What would be some of the expenses that you pay out of your cards? Would they be like the accounting fees for the trust/trustee, or other claimable things like say the internet in the trusts name?

    i was thinking an atm card would be good for eftpos reasons so that these expenses would be on one statement and not mixed with all your personal expenses (say like on a personal credit card statement) as this would make it similar or its something not worth worrying about? alternatively i was thinking of just getting a credit card inside the trust but is it simplier to just pay them with a personal card and reclaim the expenses?
     
  6. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Expenses: accounting fees, property fees that aren't paid by property manager (insurance etc), travel costs to inspect properties, postage and phone calls for managing trust assets, land tax, software to manage trust finances, etc.

    An ATM card for the trust is fine if used just for EFTPOS ... just so long as there is a clearly identifiable trail for what the money was used for - so that it is clear it was not personal use of the trust's money. If you are legitimately drawing money out of the trust for personal use, I suggest you transfer it directly to your personal account first and then take the cash from there.

    A credit card run by the trust is okay (could even be a personal card that is only ever used for trust transactions), but as a rule, I strive to minimise the number of credit cards I hold for loan servicability reasons.

    If doing stuff on a personal card, just document the expenses like you would if submitting an expense claim at work.

    I use Quicken for tracking my personal finances and Quickbooks for my trust finances ... so expenses like this are tracked in both - which does require entering the data twice, but gives a very clear indication of which expenses are which.
     
  7. DaveA

    DaveA Well-Known Member

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    thanks sim, pretty much how i was thinking about it anyway...

    yes i would like my own card for trust only but i agree with serviceabilitys... i would probably get an amex charge card but $100 annual fees each year make it not effective... atleast if it goes on my personal card ill get points for it...

    i was going to track all my stuff through MYOB, however is there a reason you use quicken and quickbooks seperatly??

    thanks for your help sim...
     
  8. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I've used Quicken for over 10 years to manage my personal finances ... it's simple and it works.

    However, the trust has certain bookkeeping requirements that are best served by an accounting package like Quickbooks (or MYOB) ... and it's much easier to just send the whole file to my accountant come tax time.

    If I was starting again, I would consider using Quickbooks for my personal finances as well - but I still think that Quicken is the better choice, it has a lot of features designed for tracking personal finances that aren't in Quickbooks, and has had a lot of usability work done to it in recent years.

    Depends on how complicated your finances are ... you may just get away with using a spreadsheet !!
     
  9. DaveA

    DaveA Well-Known Member

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    i have read a comment by nick before that he prefers most of his clients to do it via excel as most people dont no how to do it correctly...

    reason i say myob is because ive had experance setting up a file with uni and nothing with quickbooks, hence im pretty happy to just use myob as im familar with it

    thanks sim, atleast you have put me a little bit more at ease...
     
  10. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I use the terms MYOB and Quickbooks interchangably ... they do very much the same job. It really comes down to personal preference (and to a degree - what you accountant would prefer, which in 90% of cases I'll bet would be MYOB :( )
     
  11. BrettP

    BrettP New Member

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    Trust Bank Accounts & General Trust Structure

    Hi guys,

    I have a Trust set up with a corporate trustee and have just set up my bank account. In fact, the problems may be a lot bigger than that - I'll explain below. Any help would be much appreciated.

    My initial Trust structure was.. The Brett Peters Trust with A.C.N. 123xxxxxx Pty Ltd as the trustee (which is a non-trading company) - I was given the advice to set the company up with no business name.

    Originally this was going to be used solely for share trading. However, I started a consulting business and asked my accountant if I could use the Trust for this instead. He said it would be fine as long as I write down the details of the change in my Trust minutes, which I did. (Is this wise? Or hard to say without seeing the Trust Deed?)

    So from there, I registered the business name 'ICS Marketing' for the company so I could have a proper business name and one that cheques could be written out to.

    My bank account has been opened under the name 'The Brett Peters Trust T/A ICS Marketing'

    From earlier posts on this thread, I can see this may be incorrect.

    So the questions I have:

    1) Is this Trust structure, including the trading name, suitable to run my business through or should I set up a new company and start fresh? No money has gone through the Trust yet so I could go back to using it for share trading quite easily.

    2) If I am to use this Trust for my business, is it important to get the bank account name changed, or is it just a minor thing?


    Thanks in advance!

    Cheers,
    Brett
     
  12. Terryw

    Terryw Well-Known Member

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    Hi Brett

    I think you will be ok. But, I hope your trust does not own any shares or other assets as these will be at risk if the business is sued.

    The business name is just like a nick name for the entity behind it. Its like Robert being the legal name and Bob being what his mates call him. The trust is operating the business, but it is the trustee that is the legal owner for the business. The business name can be on bank accounts, and the trust's name can also be on the accounts - though they are legally being operated by the trustee.

    I don't think there is any need to set up a new trustee company or change the bank accounts.
     
  13. BrettP

    BrettP New Member

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    That's great news :)

    Thanks for your help and the fast response Terry.

    And no, the trust does not own any shares or other assets.


    Cheers,
    Brett