Is Your Trust Valid?

Category: Trusts

08 March 2016  |  by Chamonie Buys

You instruct a company to prepare and register a Trust and you accept, in good faith, that the Trust is valid.

Sadly, it turns out that this was not the case as your Trust may turn out to have been invalid from inception if one or more of the following applies to your Trust:

You signed the Deed of Trust in your capacity as the founder and the sole trustee (and in some cases the only beneficiary) making you the only party to the agreement.

This may not necessarily lead to invalidity, but it is going to be extremely difficult to demonstrate that your Trust is not a sham Trust, controlled by you for your own benefit and we recommend that you approach a specialist trust practitioner to review the Deed of Trust.

The Deed of Trust does not clearly describe the Trust property, meaning that it does not contain the donation clause which stipulates that the founder donates a specified amount (usually R100-00) to the trustees as part of the act of creating the Trust.

We advise founders of Trusts to ensure that the initial donation stipulated in the Deed of Trust is transferred to the Trust and accordingly reflected as an asset donated to the Trust in the Trust's balance sheet.

The purpose and object of the Trust is too vague.

The Deed of Trust of a family Trust should specify that the object of the Trust is to hold and administer the Trust fund for the benefit of the beneficiaries who are clearly identified and/or identifiable in the Deed of Trust.  Where no object is stated or the scope of the beneficiaries is left to the discretion of the trustees your Trust’s validity may be vulnerable to attack.

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