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essential for SA trusts
Whether or not South African trusts require an independent trustee remains a much-debated issue. Although it isn’t a legal requirement, it has become common practice for many of the offices of the Master of the High Court to require that an independent trustee is appointed on South African-registered trusts.
The Master started to adopt this practice following the judgement in the well-known Parker case in 2005. In this case, Appellate Judge Edwin Cameron remarked that in order to avoid the large-scale abuse of trusts experienced in the past, it was recommended that the office of the Master should ensure adequate separation between trustees’ control over trust assets and the beneficiaries’ enjoyment of trust assets.
Twelve years later, in March 2017, the Chief Master issued a directive that adhered to the remarks made in the Parker case, resulting in Master’s offices around South Africa insisting on the appointment of an independent trustee. The directive indicates that the Master will in particular apply the independent trustee requirement to trusts with the following characteristics:
The Master’s directive clearly defines who can act as independent trustees. These persons can’t be related to the other trustees or beneficiaries, by blood or otherwise. They also shouldn’t be beneficiaries of the trust. It’s not essential for them to be a professional person, such as an auditor or attorney, but they do need an understanding of the law of trust and what a trustee should and should not do. Finally, they must be knowledgeable about the business in which the trust operates.
An independent trustee can be known to the family, for example, as the family lawyer or accountant, or even a wealth or portfolio manager, as long as they’re an independent outsider.
In most cases it’s better to have an independent trustee in office – even more so if the independent trustee is a ‘professional trustee’, because such a person would have the necessary expertise and skills, and would be up to date with changes in legislation, court cases and tax matters applicable to trusts. When new legislation is proposed, the professional trustee can help to ensure that the impact on the trust is evaluated and/or the legislation correctly applied.
Having an independent trustee in office who plays an active role in trust management also goes a long way in proving to SARS that the trust is not being controlled by a single trustee or the founder (the so-called ‘alter ego’ argument).
While all trustees have the same fiduciary duty to look after the trust assets in the beneficiaries’ best interest, independent trustees also have the following responsibilities:
It’s important to note that in the case of irregularities, independent trustees can be held liable and sued for damages by the beneficiaries or creditors of the trust, provided there is enough evidence against them.
The Fiduciary and Tax team of Sanlam Private Wealth provides professional trustee services to clients. The service offering includes:
If you wish to enquire about the independent trustee services that our Fiduciary and Tax team offers, please contact us at email@example.com and one of our team members will gladly assist you.
The formation and registration of trusts, and the provision of independent trusteeships – both local and oﬀshore.
The creation of BEE, charitable, special and Shariah trusts compliant with regulatory and legislative requirements.
The administration of deceased estates in South Africa and abroad.
Advice on complex structures, asset restructuring and bequests in foreign jurisdictions.
Advice on emigration and immigration, foreign earnings and the application of any double taxation agreements.
Updating trust deeds to ensure they’re in line with the latest changes in the trust environment.
Updating and/or drafting of wills dealing with South African and/or foreign assets.
Advice on the establishment and management of charitable organisations, their tax status and tax deductible donations.
Advice on the potential tax consequences and reporting obligations if you hold a US passport or green card, or if you have children living in the US.
Guidance on the financial implications of life-changing events, such as getting married, divorce or the birth of a child.
Expert advice is crucial in dealing with cross-border estate and tax planning.
Stanley Broun has spent 10 years in Fiduciary And Tax.
Have a question for Stanley?
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Sanlam Private Wealth (Pty) Ltd, registration number 2000/023234/07, is a licensed Financial Services Provider (FSP 37473), a registered Credit Provider (NCRCP1867) and a member of the Johannesburg Stock Exchange (‘SPW’).
All reasonable steps have been taken to ensure that the information on this website is accurate. The information does not constitute financial advice as contemplated in terms of FAIS. Professional financial advice should always be sought before making an investment decision.
Participation in Sanlam Private Wealth Portfolios is a medium to long-term investment. The value of portfolios is subject to fluctuation and past performance is not a guide to future performance. Calculations are based on a lump sum investment with gross income reinvested on the ex-dividend date. The net of fee calculation assumes a 1.15% annual management charge and total trading costs of 1% (both inclusive of VAT) on the actual portfolio turnover. Actual investment performance will differ based on the fees applicable, the actual investment date and the date of reinvestment of income. A schedule of fees and maximum commissions is available upon request.
COLLECTIVE INVESTMENT SCHEMES
The Sanlam Group is a full member of the Association for Savings and Investment SA. Collective investment schemes are generally medium to long-term investments. Past performance is not a guide to future performance, and the value of investments / units / unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available on request from the manager, Sanlam Collective Investments (RF) Pty Ltd, a registered and approved manager in collective investment schemes in securities (‘Manager’).
Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in a portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of a portfolio and an investor will differ depending on the initial fees applicable, the actual investment date, date of reinvestment of income and dividend withholding tax. Forward pricing is used.
The performance of portfolios depend on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-dividend date. Portfolios may invest in other unit trusts which levy their own fees and may result is a higher fee structure for Sanlam Private Wealth’s portfolios.
All portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No. 45 of 2002. Funds may from time to time invest in foreign countries and may have risks regarding liquidity, the repatriation of funds, political and macroeconomic situations, foreign exchange, tax, settlement, and the availability of information. The manager may close any portfolio to new investors in order to ensure efficient management according to applicable mandates.
The management of portfolios may be outsourced to financial services providers authorised in terms of FAIS.
TREATING CUSTOMERS FAIRLY (TCF)
As a business, Sanlam Private Wealth is committed to the principles of TCF, practicing a specific business philosophy that is based on client-centricity and treating customers fairly. Clients can be confident that TCF is central to what Sanlam Private Wealth does and can be reassured that Sanlam Private Wealth has a holistic wealth management product offering that is tailored to clients’ needs, and service that is of a professional standard.