Deceased Estate Administration, Wills and Trusts

 

 

This depends entirely on the provisions of the trust deed. Some trust deeds are drafted as "revocable," allowing the Founder to amend or even terminate the trust. Most asset-protection trusts are "irrevocable" to ensure the assets are permanently separated from the Founder's estate. It is crucial to get legal advice before attempting any changes.

Yes, in a living trust (inter vivos trust), the Founder can also be a trustee and/or a beneficiary. However, the Founder cannot be the sole trustee and sole beneficiary of the same trust, as this would contradict the fundamental separation of control and benefit. In testamentary trusts, the Founder (testator) cannot be a trustee or beneficiary as they are deceased.

Yes. The original trust deed must be lodged with the Master of the High Court's Office for registration. The Master will then issue Letters of Authority, formally authorizing the appointed trustees to act.
 

Generally, in South African common law, a trust does not have a separate legal personality like a company. The assets are held by the trustees in their official capacity. However, for certain statutory purposes (e.g., tax, Deeds Office registration), a trust may be treated as if it has a separate legal identity.

The Trust Property Control Act generally requires trustees to provide security (a bond of security) to the Master to ensure they perform their duties faithfully. However, the trust deed can specifically exempt trustees from this requirement, or the Master may exempt them.

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Trust Information

Understanding Trusts in South Africa - A Comprehensive Guide

Trusts are powerful legal instruments used for a variety of purposes, from estate planning to asset protection. At VDM Attorneys, we believe in empowering our clients with clear, concise information about how trusts work and how they can benefit you.

What is a Trust?

At its core, a trust is a legal arrangement where assets (such as money, property, or investments) are managed by one or more individuals (trustees) for the benefit of others (beneficiaries). It's a fundamental principle of placing trust in someone else to administer assets on behalf of another.

The Key Parties to a Trust

A trust involves distinct roles, each with specific responsibilities and rights:

  • Founder(s) This is the individual or group who creates the trust. The Founder outlines their intentions in the trust deed, transferring ownership of assets to the trustees for administration. Importantly, the Founder legally relinquishes ownership of these assets once they are placed in the trust.
  • Trustee(s) Trustees are natural persons entrusted by the Founder to manage the trust assets according to the trust deed and the provisions of the Trust Property Control Act (TPCA). They are signatories to the trust deed and have a fiduciary duty to administer the trust solely for the benefit of the beneficiaries. While they hold legal title to the assets (bare ownership), these assets do not form part of the trustee's personal estate. South African law does not allow a sole trustee who is also the sole beneficiary or the sole founder.
  • Beneficiary(ies) These are the individuals or entities who are entitled to benefit from the trust. Beneficiaries can be specifically named in the trust deed (e.g., "John Smith") or identifiable through a clear description (e.g., "all children of X, born or to be born, and all grandchildren of X"). Beneficiaries hold certain rights arising from the trust.
  • Trust Asset(s) This is the property that forms the core of the trust. Trust assets can be anything capable of being owned and liquidated into cash, whether tangible (like property) or intangible (like shares). These assets must be clearly identified or identifiable within the trust deed.
  • Trust Deed This is the foundational written document that formally establishes the trust. It's a critical record between the Founder and the Trustee(s), detailing:
    • Which assets the Founder bequeaths to the trust.
    • Who the beneficiaries are.
    • How the trustees are to administer the trust property.
    • Prior to assuming control, trustees must lodge the trust deed with the Master of the High Court's Office.

Essential Characteristics for a Valid Trust  

For a trust to be legally valid in South Africa, it must meet five essential requirements:

  1. Intention to Create The Founder must genuinely intend to create a trust, transferring control of assets to the trustees. The Founder cannot retain ultimate power and control over the trust's management, as South African law does not permit "self-interested and self-directed trusts" (meaning a Founder cannot be the sole trustee and sole beneficiary).
  2. Legal Obligation on Trustees The Founder must intend to place a legally binding obligation on the trustees to manage the trust assets for the defined objective. This obligation can be established through a will, contract, or trust deed.
  3. Definable Subject Matter The trust assets must be capable of being defined with reasonable certainty.
  4. Definable Objective The purpose or objective of the trust must be clearly defined and ascertainable with reasonable certainty.
  5. Lawful Objective The objective of the trust must not be illegal or against public policy.

What Should a Trust Document (Trust Deed) Contain?

A well-drafted trust deed is paramount for a trust's legal soundness and effective administration. It should clearly outline:

  • Intention to Create a Trust Explicitly state the Founder's intention to establish a trust and transfer asset control.
  • Identities of Parties Clearly state the full identities of the Founder, Trustees, and Beneficiaries.
  • Trust Purpose A clear and lawful definition of the trust's purpose.
  • Trustee Powers and Duties Comprehensive details on the Trustees' powers, duties, and any discretionary authority they may have. This includes the "Joint Action Rule" for co-trustees, requiring them to act jointly.
  • Trust Assets A precise description of both corporeal and incorporeal trust assets.
  • Winding-Up Provisions How the trust will be terminated or wound up.
  • Beneficiaries' Rights Outline the beneficiaries' rights to information, accounting, and access to trust documents.
  • Trustee Remuneration (Optional) If applicable, specify the remuneration for the Trustees.
  • Security for Trustee The TPCA requires trustees to furnish security to the Master to ensure faithful performance, unless specifically exempted in the trust deed.

Different Types of Trusts

The most common types of trusts are distinguished by when they are created:

  • Living Trust (Inter Vivos Trust) This trust is created and comes into effect while the Founder is still alive, regulated by a trust deed. The Founder can be a trustee and/or beneficiary, but never the sole trustee and sole beneficiary.
  • Testamentary Trust (Mortis Causa Trust) This trust is created after the Founder's death, as stipulated in their Will. The trust's registration and activation occur only after the Founder's passing. The Founder cannot be a trustee or beneficiary of a testamentary trust as they are deceased.

Registering a Trust

To register a trust, the following basic procedures and documentation must be lodged with the Master of the High Court:

  • Original trust instrument (trust deed or Will). A Notary-certified copy may be accepted.
  • Trust registration form.
  • Proof of payment for trust instrument lodgement (not required for testamentary trusts).
  • Original written acceptance from all appointed trustees.
  • Original written acceptance from the auditor (if applicable).
  • Certified copies of trustee identification documents.
  • A beneficiary declaration (J450).
  • Trustees must provide security as deemed sufficient by the Master, unless exempted by the trust instrument.
  • The Master will issue written authorization (Letters of Authority) allowing the trustees to act.

Who Can Be Appointed as a Trustee?

Generally, any person with legal capacity can be appointed as a trustee, with some exceptions:

  • In a testamentary trust, a person who signed the Will as a witness or wrote it in their handwriting cannot be a trustee.
  • Minor children.
  • Mentally disabled persons.
  • The Master of the High Court.
  • A trustee will not be appointed if they are the only beneficiary in the trust.

Why Choose VDM Attorneys for Your Trust Needs?

Setting up and managing a trust requires specialized legal expertise to ensure compliance, maximize benefits, and avoid potential pitfalls. Our experienced team at VDM Attorneys can assist you with:

  • Drafting and registering robust trust deeds.
  • Advising on the appropriate trust type for your specific needs (estate planning, asset protection, beneficiary provision).
  • Guidance on trustee appointments and their fiduciary duties.
  • Ensuring compliance with the Trust Property Control Act and relevant common law.
  • Navigating the complexities of trust administration and potential challenges.

Contact VDM Attorneys today to discuss how a trust can serve your financial and estate planning objectives effectively.