Should you accept an appointment as independent trustee?

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Trustees are the guardians of the trust assets and have a duty to manage these assets in the best interests of the beneficiaries. SARS and creditors frequently make attempts to attack trusts, but this can be mitigated through the appointment of an independent trustee.

Which one wins: the trust deed, the will or the letter of wishes?

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People, generally speaking, do not pay sufficient attention to what they want to happen with their assets upon their deaths. This can be ascribed to estate planning not being given priority at a given time, or to people shying away from dealing with thoughts around death, or even ignorance. As the saying goes, ‘nothing is certain, except death and taxes’.

Case highlights key issues when creating a testamentary trust

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In a recent court case, van Rensburg v van Rensburg N.O. and Others (24 March 2020) issues around a testamentary trust were highlighted yet again. As the will of a deceased person forms the trust instrument, no further trust instrument is required to be lodged with the Master of the High Court. A will typically does not provide detailed provisions of how the trust should be administered. This often leads to issues arising at a later stage.

Assets and family outside SA, trusts and tax

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South African families who have created South African as well as foreign trusts may be living all over the world. Similarly, foreigners who have foreign trusts may be living in South Africa. The use of foreign trusts has been the subject matter of legislative intervention over the years. South African exchange controls were relaxed a number of years ago, allowing South Africans to invest offshore, many in so-called tax haven countries that impose zero or low rates of tax on trusts.

Paying tax on trust distributions you have not yet received?

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I recently received a phone call from a lady in her early twenties who was desperate for help. When she was a minor her parents registered her as a taxpayer and as trustees of their family trust distributed, but never paid, trust income to her in an attempt to avoid paying tax at a higher rate in the trust. Unfortunately they never paid the tax over to SARS on behalf of their minor child. When she started working after completing her university studies, she went to SARS to register herself as taxpayer, unaware that her parents have registered her years ago as taxpayer. She was confronted by SARS with a huge outstanding account of approximately R 5 million, consisting of outstanding taxes, penalties and interest. Although she has ever since tried to convince SARS that she was not the culprit, SARS insists that she owes the money to SARS. This causes her a lot of anxiety, as the family is no longer communicating to one another, her parents got divorced and the trust’s funds are depleted. There is no prospect that she will ever receive any cash from the trust in the form of distributions made to her, which remains payable to her. SARS keeps her liable for the outstanding amount. According to her, her parents “ruined her life”.

Don’t assume a trustee has the board’s authority to act

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Outsiders often assume that trustees have both the authority and the capacity to enter into transactions binding the trust. If trustees have not ensured that these requirements are met, to what extent can outsiders be deemed to have known?

Can a testamentary trust be amended?

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Often the testator or testatrix directs in his or her will that his or her assets be transferred into a trust to be formed upon his or her death. A testamentary trust is then formed upon his or her death and the terms of the last will and testament form the terms of the trust.
Unlike an inter vivos trusts, which is a contract, which the contracting parties (the founder, the trustees and potentially the beneficiaries) can amend in terms of our law, the trustees cannot amend the trust instrument of a testamentary trust on their own, as one of the contracting parties – the founder - is no longer around.

Termination of a trust does not automatically terminate trusteeship

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The Trust Property Control Act does not make provision for the termination of a trust and merely refers to the concept in Section 13, which makes provision for the fact that a court can terminate a trust, and in Section 17 setting the requirement to retain trust documents for five years after the termination of a trust. The Master of the High Court did, however, issue a directive in March 2017 setting out the Master’s requirements to deregister a trust. Even though the Trust Property Control Act does not make provision for the termination of a trust, in terms of our common law, a trust can terminate by operation of law in certain circumstances. Even though some people believe that their obligations as trustees terminate upon the happening of a termination event, the office of trusteeship comes to an end only when the trustee has duly disposed of all trust property and the Master has confirmed this. Only then will the trustees really have discharged their obligations.