Why appoint an independent trustee

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Relationship Property. For example, on death, if the trust is regarded as the alter ego of the deceased, the trust assets could be deemed to be the assets of the deceased and included in the dutiable estate of the deceased, and estate duty imposed on such assets.

It is essential to obtain legal advice regarding the status of your trust, and to ensure that your trust is compliant with the Trust Property Control Act, the common law and that it is being administered in accordance with the trust deed.

Spence Attorneys serves as an independent trustee for a number of family trusts, and can offer a wide range of trust services, such as registration of trusts and foreign trusts, appointment of trustees, trust deed variations, advice on tax implications of trusts and more. This article is for information purposes only and should not be regarded as legal advice.

Also seek advice from your attorney and tax advisor. Spence Attorneys will not be held liable for any person acting on any information contained herein. The requirement for an independent trustee to be appointed to certain trusts in South Africa arose from the decision of the Supreme Court of Appeal in Land and Agricultural Bank of South Africa v Parker and Others. The court ruled that there was no proper separation of control and enjoyment of the trust assets.

Simply put, the trustees had improperly administered the trust. Because of the Parker case, the Master of the High Court issued a Directive in March all South African trusts that meet certain criteria require the appointment of an independent trustee alongside the other interrelated and potentially conflicted trustees. The criteria are:. So, most trusts in South Africa require an independent trustee to be appointed to act independently of the other trustees to reassure the Master that the trust is being administered legally.

While there will be additional costs by having a professional, independent trustee involved in administration of the trust, the benefits of objectivity and compliance are significant.

Ideally, an independent trustee — either a natural person or a corporate — should specialise in fiduciary law. Make sure, you appoint a reputable independent trustee, typically through a professional body or association recognised by the Master of the High Court, such as the Fiduciary Institute of South Africa FISA.

The Master of the High Court may, in certain circumstances, dispense with the appointment of an independent trustee and make use of one of the following alternatives:. The independent trustee will have to complete and sign a J Master of the High Court form and sign an affidavit, making various declarations and undertakings. Ensure that the trust deed provides for the replacement of the independent trustee in the event that the rest of the trustees are of the view that such independent trustee does not act in the best interest of the beneficiaries and do not embrace the intention of the founder, as stipulate in the trust deed.

Be careful about professionals setting up trusts and creating a permanent role for themselves in the trust in the way they draft the trust deed.

SARS, creditors and soon-to-be-ex-spouses frequently make attempts to attack trusts by labelling them as alter ego trusts, but it can be mitigated through the appointment of independent trustees. So, it may be worth your while to consider appointing an independent trustee to mitigate against this risk, rather than to just view it as a nuisance to comply with.

Read more BDO Insights. Does a trust require an independent trustee.