The Ins-and-Outs of Trust Management

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The Trust Property Control Act (TPA) 57 of 1988 lays down certain criteria that trustees should follow when managing a trust. If the trustees do not follow this criteria and ignore good practice when it comes to acting in their capacities as trustees, the trust they are acting upon may be negatively affected. This article seeks to explore the basics needed for effective trust management.


What is a trust?

A trust is an accumulation of assets and liabilities. These make up the trust estate, which is a separate entity. But though separate, the accumulation of rights and obligations comprising the trust estate does not have legal personality. Hence the need for trustees: the trust must be administered by the trustees, and it is only through them that the trust can act.

Investment-options-4The overarching rule for a trustee is to always act with diligence and care

The most important rule for any trustee is: trustees shall, in the performance of their duties, act with the care, diligence and the skill which can be reasonably expected of a person who manages the affairs of another.

Trustees’ bookkeeping has to accurately indicate the property that the trustees hold in their capacity as trustees. This can become complicated for trustees and possibly the best way to avoid any issues is to appoint an accounting officer to draft and manage the trust’s accounts. The financial statements drawn up for the trust each year do not need to be audited but must clearly indicate what assets or property the trust owns.

Disposal of trust assets

Section 16 of the TPA states that a trustee must deliver all books or documents to the Master of the High Court (the Master) that will provide answers to any questions that may arise in connection with the administration and disposal of trust property.

A trustee may not, without the written consent of the Master, destroy a document that proves investment, safe custody, control, administration, alienation or distribution of trust property, unless it is more than five years after that trust has been terminated. It is the duty of the trustee to account to the Master for the administration and disposal of trust property when requested to do so by the Master. This implies that all transactions should be recorded in writing, not only as proof that the transactions took place but also that the necessary authorisation was granted by the Master.

trustfocusTrustfocus can act as your independent trustee

In order to ensure that the trust estate is protected, Trustfocus, as your independent trustee, requires the first trustees (being the trustees excluding the independent trustee) to do the following:

1. Communicate their plans to Trustfocus.

2. Provide Trustfocus with the necessary information to be able to investigate what the trustees intend to do.

What information needs to be communicated?

This depends on the proposed transaction – your representative at Trustfocus would be able to advise you in each individual case. However, using property purchase as an example the following information would be needed:

• Full address
• Description of property
• Purchase price
• Expected rental income
• A completed affordability assessment (a template to fill in is available from Trustfocus)
• Confirmation whether the sale will be subject to a bond
• Confirmation whether the property the trustees intend to purchase will be purchased from a trustee

Once Trustfocus have this information, the intended transaction will be vetted to make sure it is in the interest of the beneficiaries of the trust. This usually takes two working days.

You are welcome to contact Trustfocus on 021 979 2501 if you would like to talk to one of our skilled consultants about trust set-up and management, and accounting.

Jacques Fouche

Jacques Fouche

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