Tips for women in trusts - How to protect your family’s legacy

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A woman was married to a specialist surgeon and one son was born from the marriage. Her husband created a trust for the family, but was advised by his attorney to serve as trustee with his brother, and to be appointed as the only beneficiary of the trust. The trust deed stipulates that he can, in his will, appoint “follow-up” beneficiaries. This obviously gave him flexibility to exclude his wife and son, should the need ever arise. Unfortunately, the person who drafted his will, was not aware of this stipulation in the trust deed and did not appoint the required “follow-up” beneficiaries in the will.

How easy is it (or not) to remove a 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, as outlined in the trust deed. Choosing a trustee, without anticipating various negative outcomes, who may become problematic later, may cost you dearly.

Can you add and remove beneficiaries from a trust?

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Estate planners often create trusts and add beneficiaries, assuming that these beneficiaries can be removed or replaced over time. There may be problems with this assumption.

Is there any required number of trustees or is it a personal choice?

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Often estate owners considering registering a trust are told that there should be a specific number of trustees appointed. It is important to understand any legislative requirements and/or repercussions, as well as your personal circumstances, when you set up a trust. Trustees are the guardians of the trust assets and have a duty to manage these assets in the best interest of the beneficiaries, as outlined in the trust deed.

Implications of local trusts with foreign beneficiaries

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South African families who have created South African trusts may be living all over the world. It is important to understand the tax rules and other implications for foreign beneficiaries.

Does your trust not exist or will it be disregarded by the Court?

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The fact that you have a written trust deed is no guarantee that your assets are safe and that the trust is safe from attack. If you never intended to create a “genuine” trust from the outset, the trust may be attacked and labelled as a sham trust; in other words, a “smoke screen”. If, on the other hand, you intended to create a trust, but you have dealt with the trust assets as if they were your own, then your creditors, SARS and soon-to-be-ex-spouse can attack the trust and have it labelled as an alter ego trust; in other words, an extension of yourself.

Can a trust deed of a living (inter vivos) trust be amended?

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The trustees’ mandate is to execute functions on behalf of the trust, and in terms of the trust deed. The trust deed should determine how the trust may be amended, should such a need arise. A trust deed, for example, restricts trustees from purchasing fixed property. However, the main purpose for which the trust was established necessitates this right. In this case, the trust deed would need to be amended so as to allow for this purpose. Sometimes the trust deed does not provide for its amendment.

When does a trust terminate?

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Similar to companies and close corporations, a trust may have a perpetual existence that is not attached to the life of any person. The fact that trusts can exist for generations is one of their core benefits. There are no rules that restrict the perpetuity period of a trust, although, interestingly, it has been found that most trusts are deregistered after two generations of being handed down.