- A Trust will not come into existence if the sole Trustee of the Trust is also the sole Beneficiary of the Trust at the time when the Trust is established. In Groeschke v Trustee, Groeschke Family Trust (2013(3) SA 254 (GSJ), the court pointed out, however, that if a Trust is validly registered, and at some point after its registration, there is only one Trustee who is also the sole Beneficiary of the Trust, the Trust will remain valid.
- If all the Trustees of a Trust resign simultaneously, the Trust will continue to exist despite the “lack” of Trustees. However, new Trustees must be appointed in accordance with the provisions of the Trust Deed or by the Master of the High Court to administer the Trust assets as soon as possible.
- A Trust can, in principle, come into existence by way of an oral agreement, but then the provisions of the Trust Property Control Act (No. 57 of 1988) (“the Act”) will not apply to that “oral” Trust. The common law will apply to an “oral” Trust, but it is highly unlikely that the Master will issue a Letters of Authority to Trustees of an oral Trust in the absence of a written Deed of Trust.
- A “sham trust” and an “alter ego trust” is not the same thing. A “sham trust” never came into existence because it did not comply with the requirements of establishing a valid Trust. An “alter ego trust” is a trust which came into existence, but is abused/controlled by the Founder who is also a Beneficiary, or by a Trustee who is also a Beneficiary.
- Even if the Deed of Trust contains a clause which exempts the Trustees from liability, s 9(2) of the Act overrides such a provision and states that “[a]ny provision contained in a trust instrument shall be void in so far as it would have the effect of exempting a Trustee from, or indemnifying him against, liability for breach of trust where he fails to show the degree of care, diligence and skill … required in” the Act.”
- A letter of wishes is not binding on the Trustees of a Trust and the Trustees may choose to ignore the wishes set out in the letter. There is, however, no prohibition against a Founder or a Trustee submitting a letter of wishes to the Trustees to set out his/her preferences and wishes, but it must be carefully worded to avoid it being construed as an attempt to fetter the Trustees’ discretion.
- The Transfer Duty Act was amended in 2002 to redefine “property” and “transaction” to ensure that Transfer Duty will be payable if a Trust, which owns the immovable property, has its existing Beneficiaries and Trustees replaced by new Beneficiaries and Trustees (the purchaser/s of the immovable property) against monetary compensation.
Contributor: Chamonie Buys, Director, Fiduciary Division