Trust lessons for spouses and partners

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The real life story shared in this article provides certain lessons for spouses and partners where trusts are involved. Although trusts have been around in the world for almost a thousand years, it remains one of the most misunderstood and sometimes abused vehicles where families’ assets are housed.
Although there are remedies for the abuse of trust assets, which spouses and partners have access to, it is critical to ensure that you are either a trustee and/or beneficiary, depending on what entitlement you would have had to the trust assets in terms of your marriage regime, if a trust was not used. Without being a trustee and/or beneficiary you have no right to trust information and you cannot question or influence any decisions trustees make.

Do trustees have rights to remuneration?

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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, as outlined in the trust instrument. The trustees have a fiduciary duty to the beneficiaries of the trust. They may not act in a way that violates this duty or is outside the parameters of the trust instrument. Trustees could find themselves personally liable for losses suffered by the trust if it can be proved that they did not act with the necessary care, diligence and skill that can reasonably be expected of a person who manages the affairs of another. With this role comes certain rights, including the right to remuneration. Very few people know that trustees have a right to remuneration. The question remains – how much are trustees allowed to charge for their services that are commensurate with the risk undertaken by them for acting as trustees of a trust.

Are half of the trust assets yours upon divorce?

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Many spouses, and unfortunately to date a lot of women, get the short end of the stick when their marriages break up and there are trusts involved. The following questions can be used as guidelines when determining whether the assets in trust are at risk to any one of the spouses upon divorce:
Is the trust a trust in the real sense, or merely a “corporate veil”?
When was the trust created?
What was the intention of the founder of the trust?
Is there a conflict of interest?
How were the assets moved into the trust?

Bound by the trust

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Sometimes it is difficult for all trustees to attend a physical meeting. Luckily these days technology has made it easier for trustees to have meetings in the form of audio or audio visual meetings such as conference calls, Skype calls, etc. Alternatively the Courts accept that a trustee, who cannot personally attend a meeting, can make use of a proxy, as long as it is not broadly interprete. Only the use of a proxy to convey the input and vote of the represented trustee, in writing, (without allowing him/her to provide his/her own input and/or cast his/her own vote) will result in valid decisions taken by the trustees (Steyn v Blockpave case of 2011). The reasoning behind this is that the Trust Property Control Act 57 of 1988 only allows duly appointed trustees to act on behalf of a trust; i.e. if one is approved in writing by the Master of the High Court.

Don't blindly accept trusteeship

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Often a spouse, child, family member or family friend accepts trusteeship, without realising the burden that comes with it. Many people accept trusteeship, but claim ignorance when things go wrong. You will unfortunately not be able to get away with that. All trustees are expected to actively participate in trust matters. One is not allowed to leave the business of the trust in the hands of others. Therefore be mindful to use the services of a trust administrator and think that allows you to not be actively involved in the management of the trust.

Can someone else temporarily stand in for you as a trustee?

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Trustees are guardians of trust assets and have a duty to manage these assets in the best interests of the beneficiaries, as outlined in the trust deed.
The Trust Property Control Act stipulates the duties of trustees - section 9(1) of the act states that a trustee shall, in the performance of his/her duties and exercise of his/her powers, act with the care, diligence and skill reasonably expected of one managing the affairs of another.
A trustee’s active participation in trust matters is expected at all times.

How to build wealth within a trust

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When you do estate planning, your goal should be to:

Protect the value of growth assets in your estate
Protect assets from forced sale by assessing the availability of liquidity in your estate
Reduce exposure to taxes such as Capital Gains Tax and Estate Duty
Limit estate expenses
Ensure the smooth transition of your estate on death

Perpetual existence of trusts a core benefit

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You may have intended to create a trust to leave a legacy for your family, but a 'vanilla' trust deed may have been used that may not reflect your original intentions. Read your trust deed to find out if your intentions are reflected correctly.