1. How to protect a trust The local perspective Louis van Vuren CFP ®, FPSA ®, TEP louis@finlac.com Louis van Vuren1

2. Understand what is a trust – and what it is not The trust concept Parties to a trust The trust deed Louis van Vuren2

3. The trust concept The making over of ownership of or control over assets to a person (trustee) for the benefit of another (the beneficiary). Sec 1 of Trust Property Control Act, 57 of 1988 “The core idea of the trust is the separation of ownership (or control) from enjoyment.” Landbank v Parker [2004] 4 All SA 261 (SCA) at par 19 “Except where statute provides otherwise, a trust is not a legal person. It is an accumulation of assets and liabilities.” Landbank v Parker at par 10 Louis van Vuren3

4. The parties to a trust The Trust Estate Assets & Liabilities Trustees Founder Estate Owner Income beneficiary Capital beneficiary Income beneficiary Louis van Vuren 4 Can be the same person

5. The trust deed The trust deed is “… is the trust’s constitutive charter. Outside its provisions the trust estate can not be bound.” Landbank v Parker at par 10 A trustee can do anything legal when empowered by the trust deed, but has no powers not explicitly or implicitly authorised by the trust deed or by law. Sometimes a trust deed can be amended and the deed will prescribe how. If the founder is alive it can in any event be amended. Louis van Vuren5

6. How to protect a trust – as founder / estate owner Ensure that the trustees are independent of thought and behaviour. Accept that you don’t own the assets any more – they belong to the trustees now. Do not insist on the reservation of special powers. Don’t put pressure on the trustees to act in your interest in breach of their fiduciary duty towards the beneficiaries. Louis van Vuren6

7. How to protect a trust – as trustee Study the trust deed. If you don’t, you:  Are not acting in the best interests of the beneficiaries;  Can be held liable because you did not do what you should have. Understand your duties and powers – IT IS YOUR DUTY !  Fiduciary duty is overarching (sec. 9 of the TPCA) ; Care, diligence and skill expected of a person who manages affairs of another  Duty to apply your mind independently. Don’t be a “tame” trustee Louis van Vuren7

8. How to protect a trust – as trustee (cont.) Act jointly with other trustees – follow the trust deed.follow the trust deed  There is no “automatic” provision in law for majority decisions. If the trust deed does not provide for it, decisions are by consensus. Ensure clean, effective administration.  Keep proper accounts. No requirement for audited financials, but make sure there are annual accounts.  Ensure separate income and capital accounts.  Ensure proper records are kept – minutes of meetings.  Ensure proper resolutions are taken and recorded – follow the trust deed religiously. Louis van Vuren8

9. How to protect a trust – as trustee (cont.) Ensure clean, effective administration. (cont.)  Ensure proper and effective control over trust assets – don’t allow the previous owner to carry on controlling the assets.  Ensure proper investment of trust assets – take heed of the investment powers in the trust deed.  Be aware of the requirements of relevant legislation.  Avoid conflicts of interest and declare to co-trustees if present.  Ensure tax affairs are in order – don’t mess with SARS. Attribution equals vesting – ensure it is recorded as such. Louis van Vuren9

10. The Protector in South African Trust Law? In UK and offshore destinations – protector to ensure trustees act in best interests of beneficiaries and to get arms length away from founder/estate owner. SA trust law does not know this phenomenon. The issue of independence addressed in Parker case – although not a requirement that there must be an independent trustee. My view – just make sure trust deed and the trustees contribute to independence from the founder/estate owner. Louis van Vuren10

11. Questions Louis van Vuren11

12. Trustees to act jointly Even where majority decisions are provided for – beware! Steyn N.O. & Others v Blockpave (Pty) Ltd [2010] ZAFSHC 134 Louis van Vuren12 Dries Steyn Trust Blockpave (Pty) Ltd Fixed Property  AJ Steyn AJ Steyn J P Steyn J Steyn CP Pretorius ME Moolman Was not invited to trustee meeting where decision was taken to sue Blockpave (Pty) Ltd. Court found trustees not properly before court, as Moolman was not in position to take part in decision to sue. Rental agreement Owner in arrears Return