Ever wondered what it entails to act as a trustee of a trust? What does it mean when your nearest and dearest family members ask you to be nominated as trustee in their will or in an Inter vivos trust?

The rules are quite strict, so before you agree, make sure you know what is expected of you. Most importantly, the days of being a trustee just in name are over. You need to be actively involved in the affairs of the trust. The administration of trusts are governed by the Trust Property Control Act 57 of 1988.

 

POWERS OF THE TRUSTEE

The Trustee derives his powers from the trust Deed and he/she is confined to the powers granted therein. It is therefore very important to have a professionally drafted deed. All the powers of a trustee are ‘fiduciary’, which means that they must be exercised as follows:

• in the best interests of all the beneficiaries;
• only for the benefit of the beneficiaries and not for third parties;
• not for the trustees’ benefit, unless specifically authorised; and
• not to defeat the terms of the trust, but in compliance with them

 

CHECKLIST BEFORE YOU ACCEPT THE APPOINTMENT:

A trustee owes a duty of honesty, integrity, loyalty and good faith to the beneficiaries of the trust.  A trustee must at all times act exclusively in the best interests of the trust and be actively involved in any decisions. Prior to accepting the position of trustee, a potential trustee must ensure that:

• there is no conflict of interest between his or her own personal circumstances and those of the beneficiaries;
• they have read and understood the trust deed;
• they understand the nature of the beneficial interests and as much about the beneficiary’s personal circumstances as will be necessary to administer the trust;
• they are satisfied there are no outstanding breaches of trust by the existing trustees; and
• they have determined the extent of the trust property and will ensure that, once appointed, it is vested in the names of the new trustees.

 

GENERAL DUTIES OF A TRUSTEE:

• To always act in good faith  
• To observe the trust deed – trustees must inform themselves of the terms of the trust deed and comply strictly with the duties and directions set out in therein.
• To take possession of the trust property – the trustee needs to take charge of the trust property and he must, as soon as possible, acquaint himself with the nature and extent of thereof and take possession of the property so that it comes under his/her control.
• To act independently from the beneficiaries – trustees must not allow one beneficiary to suffer at the expense of another and must balance potentially competing interests for income and capital.
• To provide information – trustees are under a duty to provide clear and accurate accounts and produce any information or other documents relating to the trust when required to do so by a beneficiary.
• To exercise reasonable care and ensure the correct distribution of assets in terms of the trust deed
• To provide an income for the beneficiaries and to preserve the value of the capital.

 

In closing, make sure you know what you are letting yourself in for. If you want to create a trust,  make sure you have the deed, whether it is a Will trust or Inter Vivos trust drafted by a professional. We at ALCOCK & ASSOCIATES INC have experts to attend to all your legal needs, so contact us to assist

 

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)