THE DUTIES OF A TRUSTEE COME AT A PRICE
Bianca van Wyk - Director.
Trustees, like directors of a company, are appointed to manage the affairs of a trust. The trust assets do not belong to the trustee(s). Hence, trustees function as guardians of trust assets and are to act in the best interest or to the advantage of all beneficiaries. This is also known as a “fiduciary duty” which requires trust, good faith and honesty of any person or entity appointed in the capacity as a trustee.
The trust instrument, also known as a trust deed, must clearly set out the powers and duties of trustees. This will guide trustees to abide by the provisions of the trust deed as well as applicable legislation to fulfil the objectives and purpose of a trust.
The Trust Property Control Act 57 of 1988 does not prescribe qualifications for a trustee to be appointed save for section 9 of the Act which stipulates:
“(1) a trustee shall in the performance of his duties and the exercise of his powers act with the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another
(2) any provision contained in the trust instrument shall be void in so far as it would have the effect of exempting a trustee from or indemnifying him against liability for breach of trust where he fails to show the degree of care, diligence and skill as required in subsection (1).”
This essentially means that the onus is upon appointed trustees to well acquaint themselves with the trust deed and what his/her responsibilities are against the intentions of the founder and the rights of the beneficiaries. Failure to act in the best interests of the beneficiaries can subject trustee(s) to civil and criminal action, as taken by the trust beneficiaries for maladministration.
The onus of proof rests on the trustee to prove that he/she acted with the necessary diligence, care and skill pertaining to the trust assets and the distribution of benefits. Boyes NO v Bloem 1960 (3) SA 855 (T) states that mere fact that the trustee acted in good faith and on the wrong legal advice from a legal practitioner will not necessarily be sufficient to escape liability. If the court finds that the actions of the trustee(s) were indeed to the detriment of trust assets and beneficiaries, trustees may be held personally liable for pecuniary losses and/or any economic benefits received by the trustee at the time.
Hence, the title of “trustee” should not be taken lightly or for granted.
In full view of the section 16 of the Act, the Master of the High Court may call upon the trustees to account, to the Master’s satisfaction, for the administration of the trust. Thus, proper record with documentary proof of all decisions made concerning the disposal, acquiring and investment of trust assets must be kept by trustees. Furthermore, accountability between trustees is key to ensure that one or more trustees do not act in bad faith.
The success of managing a trust hinges on a well- comprehensively drafted trust instrument, informed trustees that acquire the relevant skills and knowledge on trust matters and sound legal advice.
When in doubt, consulting a legal practitioner specialising in trust law will ensure that trustees act in accordance with their fiduciary duties. Schedule an appointment with us and we can guide you through the trust registration process and beyond as a trust remains an important instrument in estate planning and to safeguard your assets against unforeseen events and creditors.