Should we trust a Trust ?

Having recently had a ‘falling out’ with the CEO of a registered Trust it seemed to be an interesting idea to do some research about Trusts. Perhaps I should have done the research before getting involved, but sometimes we trust people. Should we trust a Trust ?

First let me state very clearly that I am NOT a lawyer and that this article is based on information available on the web and therefore should not be viewed as accurate in law. The article is designed to document information I have gleaned on the web about Trusts in South Africa (Caveat Lector). If you are planning to deal with a Trust be aware that there can be issues which are best resolved up front.

trust a Trust

There is a short summary at the end of the post if you don’t have time to read the full post.

More about Trusts.

What they are, what types of Trust are there, who do they report to, what responsibilities do they have and what is the purpose of the Trust.

  • Are they just a tax dodge ?
  • Are the public allowed to peruse the Trust books of account, the current status of Trustees and the minutes of Trustee meetings ?
  • What role does the High Court play in terms of oversight and the role of the trustees.
  • And then, of course, what of the Trustees,what are their responsibilities,
    • their roles,
    • their selection criteria,
    • the responsibility for the financial affairs of the Trust
    • their legal status in the event of the Trust defaulting on an agreement or contract?
    • Can they be held liable as individuals ?

Some Important Points to Check When Contracting With a Trust:

  • Obtain evidence of the written letters of authority granted by the Master to make sure that those who are representing themselves as acting on behalf of the trust are in fact capable of binding the trust
  • Make sure that trustees are qualified to act – if a trustee becomes disqualified, that person cannot validly represent the trust and any agreement will be void
  • Make sure that the required minimum number of trustees as stipulated in the trust deed is in place – without this, an agreement will not be binding
  • Make sure that the ‘Joint Action Rule’ is adhered to – co-trustees must always act jointly in regard to trust administration

The main things specified in the trust instrument include:

  • Aims and objectives of the trust.
  • Names of the beneficiaries and whether they are to be income or capital beneficiaries (or both).
  • Rights and obligations of the trustees, including their powers, remuneration and requirements for meetings.
  • Rules and restrictions regarding the distribution of income and capital.
  • The duration and procedure on termination of the trust.
  • The procedure to be followed if the trust needs to be amended.

What does a Trustee do?

A Trustee is responsible for managing all of the assets owned by a trust for the benefit of the trust beneficiaries. The exact duties of a Trustee will vary based on what assets are owned by the Trust. For example, if the Trust consists of bank and investment accounts to contain funding transactions, then the Trustee will be responsible for overseeing these accounts.

Obtaining a copy of the latest letters of authority issued by the Master of the High Court will show you which trustees have been given the necessary authorisation to act on behalf of the trust. If any trustee claims to act on behalf of the trust he/she must be authorised by the other trustees to act on their behalf by way of a written resolution passed by all the trustees in accordance with the trust deed. One should also ensure that the resolution is dated prior to the date that the contract is entered into.

The Trust Deed

The trust deed is the founding document of a trust and is a public document which is lodged with the Master of the High Court.

Each trust is also allocated a unique identifying number by the Master and the Master issues Letters of Authority to each trustee authorising him to represent the trust.

The trust deed is vitally important as it provides for the appointment and powers of the trustees to act under the trust.

The trust deed may contain provisions regarding which trustees may represent the trust and whether all of the trustees’ consent is necessary for the conclusion of a contract and if not, what authorisation is then required from the other trustees.

It is clear in our law that, unless the trust deed specifically provides otherwise, trustees must act jointly when dealing with third parties if they are to validly bind the trust estate.

Therefore a third party dealing with a trust should as a rule of thumb always assume that the contractual powers of the trustees have to be exercised jointly by all the trustees unless the trust deed specifies otherwise.

What records should be kept and who can request information about a trust’s accounts?

Ever wondered what records should be kept by trustees and whether you can request documents or details from the Master of the High Court, or from the trustees themselves?

What are a trustees’ record-keeping duties?

The Master may ask that any book, record, account or document relating to the trustees’ administration or disposal of the trust property be delivered to him/her. Trustees may also be called upon to answer questions put to them by the Master concerning the administration and disposal of trust property.

The Master may, if he/she deems it necessary, cause an investigation to be carried out by some fit and proper person appointed by the Master, into the trustees’ administration and disposal of trust property, and may make an order concerning the costs of the investigation.

These records and documents should be kept safe until the expiry of a period of five years from the termination of a trust and may not be destroyed without the Master’s written consent.

What if a trustee does not comply with his/her duties?

If any trustee fails to comply with a request for records by the Master or to perform any duty imposed by the trust instrument or by law, the Master or any person having an interest in the trust property may apply to court for an order directing the trustee to comply with such request or to perform such duty in terms of Section 19.

Public access to Trust Documents and Information:

Previously some Master’s offices were reluctant to give the In March 2009 the RSA Acting Chief Master brought some clarity and uniformity to the subject of public access to information about trusts – written application should be made to the Office where the Trust is registered, providing reasons why this information is needed. It would seem that as long as the applicant can provide reasons and show “a sufficient interest” in respect of the trust, the Master should supply him/her with the information.

Availability of Information.

I wish to say a very big thank you to the Master of the Western Cape High Court. Last year (during July) and this morning (Tuesday 18th July) I sent requests for information to the Trust section of the Master of the Western Cape High Court. On both occasions I have received very quick and very comprehensive responses.


Should we be nervous when dealing with a trust?

When establishing whether a trust has the necessary authority to enter into a specific transaction, it is advisable to first obtain –

  • a copy of the trust deed;
  • copies of the letters of authority authorising trustees to act as such on behalf of the trust;
  • a resolution of the trustees should not all of the trustees sign the agreement authorising one or more trustees to sign the agreement on behalf of the trust;  and
  • ID documents to ensure that the trustee(s) is who he/they purports to be.

Obtaining a copy of the latest letters of authority issued by the Master of the High Court will show you which trustees have been given the necessary authorisation to act on behalf of the trust. If any trustee claims to act on behalf of the trust he/she must be authorised by the other trustees to act on their behalf by way of a written resolution passed by all the trustees in accordance with the trust deed. One should also ensure that the resolution is dated prior to the date that the contract is entered into.


The short Summary

should we trust a Trust ?

Next time I am approached by a Trust either to be a Trustee or an Employee I will ask a few simple questions.

If I am approached to be a Trustee –

  1. What are the Responsibilities and the Liabilities of the Trustees either jointly or singly
  2. What are the names and contact details of the other Trustees
  3. How often do the trustees meet and where
  4. Is the Master of the Western Cape High Court in possession of the up to date information that is required, e.g. a list of the current Trustees.
  5. If the Trust receives external funding then who administers (has control of) the funds and who has oversight of the financial transactions, including contracts.

If I am approached to be an employee –

Numbers 4 and 5 above, And –

  1. Who has control of the funds allocated for the specific project
  2. Who has signing power of the bank account(s)
  3. Is a contract in place from day 1
  4. Who do I report to and their designated role/title
  5. Is there an acceptable periodic payment system in place e.g. monthly payslips, regular payments to UIF, any Tax notifications etc.
  6. Who are the bookkeepers and can I have access to the books of account, or at least the auditors most recent audit report.
  7. Who are the Trustees and their contact details.

Next time, I will do my homework before entering into a contract or transaction with a Trust. If necessary, I will also seek legal advice .

  • The golden rule – don’t assume the Trustee has the necessary authority to negotiate your transaction (including employment contracts).
  • The other golden rule – financial errors range from innocent bookkeeping errors through misdirection of funds all the way to embezzlement.

Caveat Subscriptor ! It takes just one rotten egg to ruin an omelette.


Various sources including –

BDO website – https://www.bdo.co.za/getmedia/1ed18ab6-f01e-4a62-83f2-ce1d315d8898/bdo-trust-guid.pdf.aspx?ext=.pdf

VDMA website – http://www.vdma.co.za

Greyvenstein website – https://www.greyvensteins.co.za/Articles/entryid/81/the-knowledge-and-understanding-of-dealing-with-a-trust-and-trust-deeds

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Peter Hall

Peter Hall

Semi-retired baby boomer, part time gout sufferer, occasional curmudgeon and website dabbler.

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