The representative trustees of family or testamentary trusts are usually family members of the person setting up the trust. In terms of the Trust Property Control Act 57 of 1988, all trustees, including independent trustees, can be held liable if they don’t perform their duties and exercise their powers with the care, diligence and skill that can reasonably be expected from a person who manages the affairs of another.
Section 9(2) of the Act stipulates that any provision in any trust deed will be void in so far as it would have the effect of indemnifying trustees against liability for breach of trust or failing to perform their duties.
The obligations and responsibilities of trustees can be complex – to empower them to understand their roles and give them the information they need to carry out their duties, it is recommended that all trustees, other than trustees with experience as such, undergo some form of trustee training. At the very least, such training should include legal and regulatory requirements.
Duties of trustees
The duties of trustees in principle include:
- Having a thorough understanding of the trust deed
- Taking control of the trust assets
- Ensuring that the trust assets are invested appropriately and looked after for the benefit of the beneficiaries
- Handling the administrative function of the trust
- Keeping proper records of the affairs of the trust and all its transactions
- Ensuring that accounting records are kept, and tax compliance is done in terms of the trust deed requirements and any tax-exemption requirements (if applicable)
- Ensuring that the annual financial statements of the trust are properly reviewed and are a true reflection of the financial position of the trust
- Ensuring that trustee meetings are held during which decisions are made and general matters are discussed, including the signing off of annual financial statements
- Acting in the best interests of the beneficiaries
- Adhering at all times to applicable legislation and the terms of the trust deed, and ensuring that the latter is kept up to date with regard to changes in relevant legislation.
The trust deed
Trustees must ensure they are well acquainted with and observe the terms of the trust deed. The trust deed is the founding document and essentially the ‘constitution’ of the trust. This document will usually contain:
- The income and capital beneficiaries of the trust
- Details of annual trustee meetings
- How the annual financial statements are to be drafted
- Distributions to income and capital beneficiaries of the trust
- Rules relating to the termination of the trust
- Amendments to trust deed clauses
- Termination clauses.
Trustees in office should also have a general understanding of:
- The principles relating to accounting and tax applicable to the trust and trust beneficiaries
- Whether an aspiring trustee is eligible to be appointed as trustee
- What it means for a trustee to apply their discretion as trustee
- How to actively take part in trustee meetings
- The concept of trusts in the context of South African law.
Sanlam Private Wealth offers training to trustees on all aspects of trusteeship as set out above. To book a trustee training session, or for further information, please contact Stanley Broun on +27 (0)11 778 6648 or firstname.lastname@example.org.