Who will be punished: the trustee, independent trustee, trust service provider, accountant, or tax practitioner? 18 March 2023

Overnight, the world of trusts has changed. That, while a large percentage of trusts in South Africa do not even have an independent trustee appointed who can guide the lay-person trustees, being the estate planner, their spouse, children, friends and so on. In many instances, the accountant, attorney, or financial adviser of the estate planner agreed to act as trustee of the trust, with the expectation that they should not interfere too much in trust decisions. These trusts were structured cleverly to allow the husband and wife (for example) to outvote the independent trustee, using the majority vote rule in the trust deed – in effect ‘window dressing’. These independent trustees often have no idea what is happening in the trust and are often excluded. With all the recent changes affecting trusts, it begs the question – who will be punished for any wrongdoing, negligence, or non-compliance of a trust? If things do go wrong, can any trustee claim ignorance?

‘Joint-ownership, joint-action’ rule

However inconvenient, undesirable it may be, trustees are required to act jointly on all matters relating to the trust. It was held in the Parker case that the “rule derives from the nature of the trustees’ joint ownership of the trust property. Since co-owners must act jointly, trustees must also act jointly. Professor Tony Honoré’s authoritative historical exposition has shown that the joint action requirement was already being enforced as early as 1848. It has thus formed the basis of trust law in this country for well over a century and half.” When trustees deal with third parties, the ‘Joint Action Rule’ applies. Clearly all trustees will be held accountable for any wrongdoing in the trust. A ‘silent’, ‘sleeping’, ‘absent’, or ‘puppet’ trustee will not be tolerated.

The trust service provider or accountant

Trust service providers have to support their clients, as often they are laypersons who act as trustees. Reputationally it carries a huge risk if clients assume things are taken care of and it is not. The services offered should be spelled out so there is not misunderstanding between the parties. The assistance of the service provider does, however, not reduce the responsibility and accountability of the trustee of a trust.

Greylisting measures with major fines and/or imprisonment

We were greylisted on 24 February 2023, but new measures were already legislated in late December 2022 to strengthen South Africa’s anti-money laundering and terror financing legislation, in an attempt to prevent a potential greylisting. Few are aware of exactly what is expected of them as a result, and even fewer are aware of the massive penalties for non-compliance – a fine not exceeding R 10 million or imprisonment not exceeding 5 years, or both. Most of the amendments have an effective date of 1 April 2023; therefore not a lot of leeway is provided by Government for trustees and service providers to get their acts together.

Basically, each trustee has to keep up-to-date records of the beneficial ownership of the trust. Founders, trustees, and beneficiaries are all defined as beneficial owners, trustees. In terms of the draft regulations, a long list of information is to be kept on all these parties from 1 April 2023, which requires constant updating. This information will have to be reported to the Master and the South African Revenue Service (SARS).

Trustees are also to provide details of accountable institutions, which trustees use as agents to perform trustee functions and who provide any services to trustees from 1 April 2023.

Trustees are to disclose their position as trustees to any accountable institution with which they engage in that capacity, and must make it known to that accountable institution from 1 April 2023.

IT3(t) – trustees to become third party data providers to SARS

The boards of trustees in South Africa are soon to become third party data providers to SARS. They will be required to report distributions made to trust beneficiaries to allow SARS to pre-populate beneficiaries’ tax returns. The representative taxpayer will be held personally liable for non-compliance. This role should therefore be carefully considered by the board of trustees and the person accepting this role has to realise the risk associated with it.


A spouse, child, family member or family friend will often accept trusteeship without realising the burden that comes with it. Many people accept trusteeship but claim ignorance when things go wrong. All trustees are expected to actively participate in trust matters, and one is not allowed to leave the business of the trust in the hands of others. Be mindful, therefore, of using the services of a trust administrator, thinking that it excuses you from being actively involved in the management of the trust – because it doesn’t. Trustees will have to ensure that proper digital systems are implemented to take care of their (new) obligations.

~ Written by ~


Who will be punished: the trustee, independent trustee, trust service provider, accountant, or tax practitioner? 18 March 2023