THE HIDDEN BURDEN OF TRUSTEESHIP

In boardrooms and business circles, being asked to act as a trustee can feel like a mark of respect – a role offered out of trust and prestige. But make no mistake: trusteeship is no honorary title. It is a legal obligation with serious responsibilities and, increasingly, real risks.

For decades, trusts have been used to hold family assets, protect wealth, and manage intergenerational planning. Often informal in practice, these vehicles were treated as little more than passive asset holders. Trustees – typically family friends, business associates, or advisors – were appointed with little thought and even less guidance. That era is ending.

The law is catching up with casual trusteeship. Tax authorities are taking a closer look. Compliance obligations are tightening. And those who have accepted the role without understanding it are facing exposure.

Trusteeship Is a Legal Role – Not a Favor

At its core, a trust is a contract. T he trust deed sets out the rules, the powers, and the obligations that trustees must follow. Yet many trustees, particularly those appointed out of goodwill, never read the document. Fewer still understand that if the deed is drafted poorly or inflexibly, they could be stuck – unable to act without costly amendments or court approval.

The fiduciary duty of a trustee is among the highest in law. Trustees must act in the best interest of all beneficiaries, impartially and diligently. They must maintain records, oversee f inancial statements, manage bank accounts, and ensure the trust is tax compliant. In most cases, the trustee serves as the trust’s public officer – meaning if tax filings are missed or errors are made, they are on the hook. And no, ignorance is not a defence.

The Enforcement Tide Is Turning

Until recently, the system was lenient. Many trusts went years – even decades – without proper administration, and nothing happened. But regulators are increasingly enforcing compliance, and when the knock comes, it is the trustee who answers the door.

One of the most misunderstood requirements is the need for formal trustee meetings. At least once a year, trustees must gather to review the trust’s affairs, approve financial statements, and decide on distributions – all before year-end. Backdating distributions or acting months after the fact is not just bad practice; it’s unlawful.

Tax Optimisation? Not Without Risk

There’s a common perception that trusts offer easy tax benefits. Distribute income to low-income beneficiaries, lower the overall tax bill – simple. Not quite. Tax law, particularly Section 7, enables authorities to “look through” the trust and attribute income back to the person who originally contributed the assets – especially if distributions are made to minor children. While some tax efficiencies are still possible, each case must be assessed carefully. A misstep can cost far more than the tax saved.

The Business Takeaway

If someone asks you to become a trustee, think twice. Better yet, say no – unless you fully understand the commitment and are adequately compensated. This is not volunteer work. It’s a serious legal role with rising compliance burdens, personal liability, and reputational risk.

And if you are setting up a trust, take professional advice from the outset. A poorly constructed trust deed is not just a nuisance – it can render the entire structure ineffective, or worse, non-compliant.

Trusts remain useful tools in wealth planning and corporate structuring. But the casual approach to trusteeship belongs in the past. It’s time business leaders treated the role with the seriousness – and caution – it demands.

And If your trust no longer serves its purpose and you are concerned about your obligations as a trustee it may be time to consider closing it.

For more information contact:

Alan Hockey: +27 (0)71 673 9937 or

Brian Payne: +27 (0)83 309 1982

W: www.lemsystems.co.za