notes: 03.04.2017

The trust

It’s a legal institution created by a testator in a will. A full definition is given in  the Trust Control Property Act 57 of 1988…. Please know it!

From the mentioned definition the following is the legal nature of the trust:

•That the trust may be created to benefit a particular person or a class of persons (e.g. I give an amount of R300 000 to my son A or I give an amount of R300 000 in equal shares to all my children, provided that the money will be kept and administered by Old Mutual until each child reaches the age of 21)

•A trust may be created for no particular persons benefit, but to serve a certain objective (e.g. I give an amount of R600 000 to the University of Zululand to be used for the financial aid to students who are financially needy and have good marks)

•The control and sometimes ownership over the trust property is not vested on the beneficiary, but is vested on another person or an institution referred to as an institution.

•Sometimes the ownership is given to the beneficiary, but the control thereof is given to the trustee;

•Though the trustee is given ownership and control the trustee acts on behalf of the trust beneficiary and has no rights arising from the trust except for his remuneration;

•The trustee may not dispose of the assets or property of the trust except in exceptional circumstances;

•Although its not a juristic person the trust for some purposes is regarded as a separate person, for example it may be declared insolvent on its own.

Parties to the trust

A.The testator (the creator)

B.Trust beneficiary ( a person for whom the trust is created and the one to benefit from the trust)

C.The trustee (a person whom the ownership and control of the trust property is vested, one who controls the property on behalf of the trust beneficiary)

For a trust to be valid the following requirements must be complied with:

a)It must be clear from the will that the testator intended creating the trust. The use of the words such as trust and trustee can give an indication that the testator is creating the trust

b)The testator must indicate the following with reasonable certainty:

•What are the trust assets

•Who is the trust beneficiary, unless he confers the power of appointment thereof to the trustee

•If it is charitable trust, what are the trust objectives and;

•Who is the trustee

Trustee full and proper definition is found in S1 of the Trust Property Control Act.

Who appoints the trustee?

The trustee is nominated(not appointed) by the testator (the trust founder)

The nominated trustee is then appointed by the master of the High Court or by the high court having Jurisdiction in the area where the trust document nominating the trustee was executed.

The trustee may only begin his duties once only authorized by the master to do so.

Duties of the trustee

A.Report to the Master

B.The trustee must lodge the trust documents or certified copy thereof with the Master accompanied by the prescribed fee, unless the Master is in possession of such document already;

C.Please continue to read more of these duties….

There are two types of trust beneficiary

1.The income beneficiary ( when the trust provides for a beneficiary to be paid on per month during the duration of the trust until the trust money is finished.

2. capital beneficiary ( this is when the trust provide for the transfer of the trust property or money in the trust at the expiry of a trust period)

Is ownership given to the beneficiary of trustee?

If the ownership is given to the trustee, the trustee holds the property in the interest of the trust beneficiary, not for his personal gain.

The nature of the trust beneficiary is a personal right against the trustee to control the property in accordance with the trust document.

If the ownership has been given to the trust beneficiary, the nature of the beneficiary’s right is a real right (he owns the property), however, the trustee keeps the control thereof and administer it in accordance with the provisions of the trust document.

What are the remedies of the trust beneficiary?

a)Can obtain a prohibitory interdict against the trustee, who wants to alienate the trust property;

b)If the trustee fails to carry any of his duties, the trust beneficiary may use the trustee based on his personal right against the trustee for the compliance with his duties;

c)Can claim the restoration of a trust property from a third party who receives such property knowing that its breach of trust provision;

d)If the trustee intentionally or negligently fails to administrate the trust asset properly, or misuse the trust property, the trust beneficiary may sue him for damages.

Self study on termination of the trust….

Foundation

Foundation is also a legal institution that can be created in the will.

The legal nature of foundation

•It’s a juristic person without members, can acquire rights and obligations.

•The difference between a foundation and a trust, is that a trust is not a jurististic person and does not have rights and obligations.

•A foundation functions through its administrators, managers and representatives, who are not its members and therefore acquires no rights and obligations from it.

•A foundation may serve the interests of specified beneficiaries, however most of the times it is established for certain objectives.

How can a foundation be established or created?

A.By legislation (e.g. Cultural institutions Act 29 of 1969, allows the minister of Home Affairs (domestic affairs), to give an institution such as the museum or library the legal personality;

B.Between living persons (e.g. children homes catering for homeless children) and

C.In terms of the will

You can read on the termination of the foundation