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  • Writer's pictureRikus Scheepers

Amendments to the Trust Property Control Act: more than just trusting your gut

Updated: May 15, 2023

Taking on the role of a trustee for a trust can make you feel both important and overwhelmed, especially if you are unfamiliar with the ins and outs of a trustee's duties and responsibilities.

It is crucial to remember that trustees can be held personally liable for any losses the trust suffers due to their negligence. Trustees must take their roles seriously and always act in the best interests of the trust and its beneficiaries. With recent amendments to the Trust Property Control Act, it is high time we take a closer look at these duties and responsibilities.

Established duties:

As a trustee, you must manage the trust assets to benefit the beneficiaries. This means that you have a duty of care to act in their best interests, and not for your gain or that of a third party who is not a beneficiary.

One of the most important duties is to act with independent discretion. Decisions must be based on what is best for the trust and its beneficiaries without being influenced by outside pressures or personal interests.

It is also essential that you act in accordance with the trust deed. The trust deed sets out the rules and guidelines for the trust, and you must always ensure that you follow them.

You must act honestly and with the utmost good faith, putting the interests of the trust and its beneficiaries above your own.

Another responsibility of a trustee is to ensure that the trust's property is separated from any other property and not used for personal gain unless authorized. This means that you must keep accurate accounting records for the trust and attend to statutory filing requirements such as the filing of tax returns.

Finally, remember that you are not alone in your role as a trustee. You must work with all other trustees to ensure that the trust is managed properly and in the best interests of the beneficiaries.

Duties following the amendments:

Trusts have long been a popular means of protecting assets in South Africa. However, one of many issues with trusts is the potential for abuse, as trusts can be used to hide assets while providing indirect control over the assets to trustees and beneficiaries. It can result in beneficial ownership of trust assets without proper transparency or accountability.

As of 1 April 2023, several legislative changes to prevent the misuse of trusts by beneficial owners came into effect.

One of the key amendments to the Trust Property Control Act is that trustees must now disclose when they are acting in their capacities as trustees and when a transaction or business relationship relates to trust property. It applies to dealings with accountable institutions such as legal practitioners, estate agents, banks, life insurers, and financial service providers.

In addition, trustees must record details about accountable institutions appointed as agents by trusts to perform functions or provide services related to trust property. It includes information such as the agent's name, contact details, and the nature of their appointment.

Another change is that trustees must establish and record the beneficial ownership of the trust. It means keeping a record of information such as the full names, ID or passport numbers, residential addresses, and tax numbers of everyone who falls within the definition of a beneficial owner. This information must be compiled in a register and lodged with the Master's Office through an online portal.

It is important to note that the term “beneficial owner” is now used in a much broader context than it is ordinarily used. This term now includes not only the natural person who ultimately owns the trust property but also those who exercise effective control over the administration of the trust, as well as each beneficiary, founder, and trustee.

The importance of the amendments:

These amendments were designed to ensure greater transparency and accountability in the management of trusts and to prevent them from being used for illicit purposes. As a trustee, it is crucial to familiarise yourself with these changes and ensure that you comply with the new requirements.

While this may seem like an additional administrative burden for trustees, it is a step towards greater transparency and accountability in the management of trusts. However, it remains to be seen how effectively these new provisions are enforced. The Master's Office is not known for its efficiency, and there are concerns that these records may not be scrutinized as closely as they should be.

Nonetheless, lifting the veil of invisibility afforded by trust structures is a positive development we welcome in a country filled with corruption and money laundering.

These recent amendments with penalties of huge fines or imprisonment may make you feel overwhelmed by the additional requirements placed on trustees and have made acting as a trustee more daunting.

Whether you are setting up a new trust or need help locating information for an established one, having a trustworthy legal partner to help you navigate the legal landscape will make life easier.

Do not let the stress of being a trustee weigh you down. Contact Van Zyl Scheepers Attorneys today. Let us be your legal right-hand.

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