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Provided by the South African National Department of Health
Independent trustee increasingly
essential for SA trusts
Sanlam Private Wealth
Dec 07, 2016
By: Stanley Broun and Carien Strauss
The Master started to adopt this practice following the judgement in the well-known Parker case. In this case, Appellate Judge Edwin Cameron remarked that in order to avoid the large-scale abuse of trusts experienced in the past, the Master should ensure that there is adequate separation between control over trust assets by the trustees and the enjoyment of trust assets by the beneficiaries. The judge therefore recommended that the Master insist on the appointment of an independent trustee for family trusts.
It appears we’re moving towards adopting a practice that already exists for offshore trusts. For offshore trusts, it’s common practice to have only one trustee in office – the independent offshore trust company. The beneficiaries and settlor of the trust are typically not appointed as trustees on the trust and the settlor can communicate his or her wishes by means of a Letter of Wishes addressed to the trustees.
For those who had hoped that this issue would fade away, we unfortunately have bad news. To show the seriousness of the matter, the Chief Master has now issued a directive to formally implement the decision taken in the Parker case in Master’s offices around South Africa.
The directive indicates that the Master will in particular apply the independent trustee requirement to trusts in which:
Until recently it was widely understood that an independent trustee was a person who wasn’t a beneficiary of the trust, or wasn’t related to the beneficiaries or trustees. This person didn’t have to be a professional – a family friend could therefore have qualified as an independent trustee.
However, the Master has now for the first time defined what it perceives to be an independent trustee. The Master’s directive states that an independent trustee may be a professional chartered accountant, admitted attorney or an advocate:
In most cases it’s better to have an independent trustee in office – even more so if the independent trustee is a ‘professional trustee’, as 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, such as the draft legislation relating to interest-free or ‘low’ interest loans to trusts, 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 the 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).
The Tax & Fiduciary team of Sanlam Private Wealth also provides professional trustee services to our clients. To ensure that your trust remains up to date with the latest legislative and compliance requirements, our service offering includes:
If you wish to enquire about the independent trustee services that the Sanlam Private Wealth Fiduciary and Tax team offers, please contact us at firstname.lastname@example.org 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.
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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’).
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The management of portfolios may be outsourced to financial services providers authorised in terms of FAIS.
TREATING CUSTOMERS FAIRLY (TCF)
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