A fine line between delegation and abdication of trustee responsibilities

~ Written by ~

Trustees are the guardians of the trust’s assets and have a duty to manage these assets in the best interests of all beneficiaries, as outlined in the trust instrument. Trustees may not act in a way that violates this duty, or is outside the parameters of the trust instrument. A number of trustees do not appreciate the seriousness of this role and often abdicate their responsibilities as trustees, either to avoid conflict with other trustees (typically soon-to-be-ex spouse) or because they are ‘silent’, ‘sleeping’, ‘absent’, or ‘puppet’ trustees, which our law in any way does not allow (Slip Knot Investments 777 (Pty) Ltd v du Toit case of 2011).

It’s necessary to review your will and trust deed regularly

~ Written by ~

When someone has a will drafted or a trust registered, it is done given specific circumstances and at a point in time in one’s life. These circumstances do change. One could (and should) therefore review one’s will and trust deed on a regular basis, but at least once a year, to ensure that its terms are still relevant and representing one’s current circumstances. For example, one may have gotten divorced or married, one particular family member may become more reliant on financial support from the estate planner than others, children or other family members may have emigrated, which may introduce resultant tax complications for them as heirs and/or beneficiaries, etc. Laws may also have changed, which may warrant an amendment of the trust deed. The beginning of the year is a good time to review your will and trust deed.

How to protect your assets

~ Written by ~

The number one wealth preservation rule is to protect your assets. If you have your own business, sizeable investments and/or other assets, then you might want to pay attention. One of the most important reasons to consider a trust is because it will help you to separate your assets from your property investment debt, your business interests, and/or your other financial risks.

How easy is it to have a trustee removed?

~ Written by ~

The removal of trustees will always be a delicate matter, especially in terms of a testamentary trust where the testator or testatrix handpicked the trustee(s). It was held in the Gowar v Gowar case of 2016 that the Court’s power to remove a trustee must be exercised with caution – it should consider whether the trustee’s conduct endangered the trust assets or its proper administration. Conflict between the trustees and/or beneficiaries is, therefore, not sufficient reason for a court to remove a trustee. The overriding factor is the welfare of the beneficiaries and the proper administration of the trust and the trust assets.

Do you want to bequeath your assets to an existing trust upon your death?

~ Written by ~

In many instances, it may make sense to utilise existing trust(s) as part of your legacy plan. Your assets can be bequeathed to an existing trust – if the trust instrument allows for it. If this is the case, the trustees of that trust have to be specifically empowered in terms of the trust instrument to accept such a bequest. Review the trustee power clause to ensure that the trustees can, in fact, accept further donations or bequests.
An obvious asset to bequeath to a trust is a loan owed by the trust to the testator or testatrix. Such loans typically originate from the sale of assets to a trust. The testator or testatrix can also bequeath other assets to one or more existing trusts.
While it appears that one can bequeath assets to both vesting and discretionary trusts (both ownership trusts, where the assets are held by the trustees for the benefit of beneficiaries), it is important to be mindful of certain principles.

Is the time right to consider forming a trust?

~ Written by ~

2021 turned out to be a challenging year for many people and very few of us had the time to reflect and consider our personal financial and estate planning. Many jobs have been lost and it proved to be particularly challenging for business owners. A number of people can attest to the devastating consequences of not having one’s financial affairs in order by the time one is faced with a financial challenge and upon someone’s death. Now that many people are taking a holiday break, it may be wise to reflect and to consider one’s personal financial situation and estate plan.

No trustee can turn a blind eye to the wrongdoing of another

~ Written by ~

Trusts are often trusts in name only, with an essential principle of trust law, namely the independence of trustees, neglected (Tijmstra v Blunt-Mackenzie case of 2002). It is, therefore, important to note that all trustees are acting in a fiduciary capacity, and no one trustee can hide behind another. A fiduciary duty is an onerous, legal obligation (a duty of loyalty and care) of a person managing property or money belonging to another person to act in the best interests of such a person. All trustees, without exception, are to act with the care, diligence and skill, which can reasonably be expected of a person who manages the affairs of others (Section 9(1) of the Trust Property Control Act).

Is your independent trustee a ’super’ trustee?

~ Written by ~

It has become a requirement to appoint an independent trustee in certain circumstances. Developments in legal precedent, the Master of the High Court’s views and practice, as well as the impact of professional bodies on persons considering to act as trustees, are important considerations when it comes to the consideration of the relevance and importance of an independent trustee.