Trusts in South Africa – A Basic Guide for Trust Founders, Trustees & Beneficiaries | Legal Articles

 

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Trusts in South Africa – A Basic Guide for Trust Founders, Trustees & Beneficiaries

For most people the creation of a Trust is usually done as part of their estate planning. In most of the instances the Trust Founder will be aiming to protect and preserve assets and property for future family generations, and sometimes for financial reasons. Yet some others create Trusts so that they achieve a favourable tax outcome, which was met with frown by SARS at some point when it altered percentages in some tax quotas.

It is therefore important to create a Trust for the right reasons and we advise parties to consult with an attorney so that one can be assisted in estate planning.

trusts in south africa

Trusts and Estate Planning Guide South Africa

Not all people who find themselves having to deal with Trusts understand what it is all about, therefore in this brief discussion we will highlight the prominent issues that one has to familiarise themselves with in order to safeguard their interests when dealing with a Trust. It can be the Trust Founder, Trustees, Beneficiaries or third parties transacting with a Trust. The information herein will give a basic guideline so that one understands what ought to happen in the running of a Trust.

Registering the Trust

A Trust must be registered with the Master of the High Court. The Trust Deed and other supporting documents will be required to be lodged with the Master, so that the registration may be attended to. Until such time the Trust is registered and the Trustees issued with Letters of Authority, they may not transact on behalf of the Trust nor act in representative capacity of the Trust. Any action prior to being authorised by the Master is void and invalid.

The Trust Deed

This is the instrument that provides for the composition of the Trust and how its affairs must be presided over. It must be lodged with the Master of the High Court together with other documents. The Trust Deed provides for duties of the Trustees among other things and it is important that it contains adequate provisions for the Trustees to clearly know the bounds of their authority and actions. It further contains provisions on distribution of the benefits to beneficiaries, the holding of meetings, names of the beneficiaries and so forth.

Running of the Trust

It is noteworthy to know that the running of the Trust is the responsibility of the Trustees, who are so authorised by the Master of the High Court by issuance of a Letter of Authority (as Trustee). A Trust is run separately from the estate of the Trust Founder and its assets must be registered in its name. A bank account must be opened and financial documents prepared and made available as per provisions of the Trust Deed.

Trustees may require the services of a third-party agent to execute instructions, which they would have resolved as the Trustees. What can be delegated is the actual execution of the resolutions but not the decision-making process itself, it is unlawful.

The resolutions themselves must be recorded in the minute book which must be maintained and made available for record keeping.

The Trustees

As alluded to above, these are the people responsible for running the affairs of the Trust. Their joint decisions and resolutions bind the Trust, to the extent that it is not prohibited by the Trust Deed.

For example, the Trustees may not make a binding resolution to lease Trust property to companies whereas the Trust Deed prescribes that such property may only be leased to individuals. Trustees have a fiduciary duty to act in the best interest of the Trust and the beneficiaries in the discharge of their responsibilities.

Trustees must act with diligence, care, honesty, and skill in the discharge of their duties and where it is found that their continued service as a Trustee is untenable, they may be removed through resignation, a process provided for in the Trust Deed, request to the Master of the High Court or a Court application provided for in section 20 (1) of the Trust Property Control Act 57 of 1988.

Since the landmark case of Land and Agricultural Bank of South Africa v Parker And Others 2005 (2) SA 77 (SCA), the Master requires that at least one of the Trustees be independent and not related to the Trust Founder, other Trustees or Beneficiaries in family business Trusts.

Van Deventer & Van Deventer Incorporated – Estate Planning Attorneys in Cape Town and Johannesburg

We assist with Trust matters in various aspects. Being a sophisticated area of law, we strongly advise Trust Founders, Trustees, Beneficiaries, and other parties having an interest in Trust property to consult with us pertaining to enforcing rights and guidance on Trust issues.

We also assist in the formulation and compilation of Trust Deeds that have adequate provisions to cater for various situations.

 

The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter. One should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this site contain general information and may not reflect current legal developments or address one’s peculiar situation. We disclaim all liability for actions one may take or fail to take based on any content on this site.

Comments are closed for this post, but if you have spotted an error or have additional info that you think should be in this post, feel free to contact us.


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