Discretionary Living Trusts A legacy for generations

Written by Trust Specialist, Mervin Messias, it is the culmination of knowledge and expertise that has been acquired over many years’ study and practice of Trust law.

The author recommends the use of Trusts as part of estate planning because they provide solutions to many potentially complicated problems related to asset protection, succession planning, and disability protection. Many little-known benefits of Trusts are revealed to help protect your hard-earned wealth for generations to come. A Trust circumvents the whole process of winding up an estate, together with its potential delays, hassles and frustration.

In fact, a Trust deserves pride of place in any estate plan. It means business as usual, even after death, with no executor, executor’s fees or estate duty.

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    This is what you need to know about trustees.
    Trustees are required to assume non-beneficial ownership and control of trust property.
    They act in a fiduciary capacity, that is, in the best interests of another, and as office bearers they assume the power, accountability and liability inherent in the role.

    Before the trustees can proceed, they have first to lodge the trust deed with the Master of the High Court, following which their appointment as trustees has to be authorised by the Master with the issuing of their Letters of Authority. Their duties and powers need to be clearly defined in the trust deed as the law does not currently define this aspect adequately.

    Trustees have a fundamental duty to act within all applicable statutory provisions, the principles and rules of common law and the terms and parameters determined by the trust deed.

    Hence, the founder is urged to select people who understand the application of related laws and performance expectations, are committed to the principles of good governance and are known for their integrity, business acumen and administrative skills. Choose your trustees well, the role carries significant responsibility.

    Their interaction with the beneficiaries requires good interpersonal skills with the ability to remain impartial. They need to be financially secure as individuals and situated in the area where the beneficiaries and assets are located.

    Trustees can be either individuals (the founder may be included), or corporations. Their willingness to serve as trustees and do the necessary (and often onerous) work to achieve the founder’s objectives, is a serious commitment. Candidate trustees, before accepting the appointment, would be well advised to do some due diligence of their own since the law does not tolerate ignorance as an excuse.

    Trustees are obliged to follow the instructions laid out in the trust deed and ensure that in so doing, no laws are breached. Any departure from instruction or legal parameters that incurs loss may involve them in liability and oblige them to make good such loss, even if they were acting in good faith.
    In exercising their responsibilities, they have the authority to consult or employ experts in aspects of trust administration that require specialised knowledge or skill.

    They have a duty to act jointly and as such, decisions require either a majority or unanimous vote. Once they acquire ownership of the trust property, they are obliged to keep strict accounting records and financial statements that comply fully with the Trust Property Control Act and common law. They also have to keep detailed records of trustee meetings and resolutions as they are accountable to the Master for their record keeping and administrative performance.

    Similarly, they are compelled to keep a proper and detailed asset register that clearly identifies trust property, maintain a record of the nature of the trust assets (property, money and shares) as well as their precise location and the monetary value of each. Trust property has to be conserved in a manner that retains its value and, if possible, increases it.

    Trustees are required to open a separate trust account/s at an accredited banking institution and deposit all trust funds and financial gains into it, distribute income and capital to beneficiaries subject to the directions prescribed in the trust deed and carry on a business without exposing it to undue risk.

    They are also required to account to any trust beneficiary in respect of the state of the trust property and have the power to withhold income and/or capital from a beneficiary if provided for in the trust deed. All distributions to beneficiaries are at their discretion.
    The parameters in terms of operational scope have to be clearly defined by the founder. Clarity is of primary importance as the trust deed may impose limitations on the powers of trustees, who are legally limited to exercise only those powers conferred by the trust deed.

    The office of trusteeship comes with multiple administrative elements and powers. They are obliged to act in the best interests of the trust at all times but the scope of their authority is largely determined by the founder in the trust deed, which genuinely warrants the guidance of a trust specialist.



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