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Wealth Masters - The danger of an outdated Trust

Trust requirements have changed in the past years, and it is crucial to have an up-to-date Trust Deed and Letter of Authority at all times.

Although we rely on the Trust Property Control Act 57 of 1998, we must include the Master Directives, specific statutes, and case law.

This article will look at common outdated clauses and issues possibly relating to your Deed. If you see any of these issues, it is vital to contact a TTS Trust Advisor as soon as possible to review and amend your Trust Deed to avoid the risk of losing your assets.

No Independent Trustee Appointed

It has become a standard requirement from the Master that a truly Independent Trustee gets appointed to every Trust. The Master will accept no registrations of new Trusts and amendments of old Trusts before the Independent Trustee is appointed. Look at your Letters of Authority and make sure the Independent Trustee has gets noted. If contact with an Independent Trustee is limited or the company where they are employed is no longer operational, it is imperative to appoint a new Independent Trustee. As always, we can assist you with this through our trusted and expert service provider, Treasury Trust Services.

Amendment clauses

When the Founder is the only person who may vary the Trust Deed, it is essential to note that a Founder must give up control of the Trust assets. The Founder may not control the Trust nor be a dominant Trustee. A Trust may have variations during the lifetime of the Founder. Still, it must be in writing between the Founder, Trustees, and any beneficiaries who have received a vested right.

There should also be a provision in the Deed after the death of the Founder. The Trustees and the beneficiaries who received a vested right must be able to amend the Deed to ensure that the Trust can continue for generations to come.

Replacement Trustees

In older Trusts, the Founder may have named replacement Trustees, which have since passed, or it may no longer be practical to appoint them as replacements. Although it is permissible to name the replacement Trustees in your Trust Deed, we advise that this clause get amended to give a Trustee the power to nominate a replacement in their Will.

A Trust Deed must get amended every time you change a replacement Trustee, which can be costly and time-consuming as you will have to wait for the Master to confirm that the amendments have been noted. You can change the Will anytime before death when nominating replacement Trustees in your Last Will and Testament.

Alternate Trustees

In South Africa, a Trustee may only attend to valid transactions when they get duly appointed by the Master of the High Court of South Africa. The Master must issue a valid stamped Letter of Authority indicating the same. The Trust Property Control Act does not make provision for the appointment of an alternate Trustee, which was confirmed in the "Hoosen v Deedat" case. Removing such clauses and relying on a proxy where Trustees cannot attend meetings is essential. These types of decisions by alternate Trustees may be invalid.

Termination of Trust Clause

In many of the Trust Deeds we receive, the termination clause is vague, or, in some instances, there is no mention of this. The termination clause must state when the Trustees will have to adhere to the termination date. In discretionary Trust, it is usually unanimously determined by the Trustees. The division of assets must be set out, and, again, this gets decided by the Trustees. In basic terms, your Trust must have guidelines as to who will terminate the Trust and to whom/how the assets will get divided.

Discretionary and Vested Rights

In almost all cases when we receive a review, the Deed provides clauses that give the Trustees discretionary powers, but further along, we see conflicting clauses where, for instance, if the youngest child turns 25, the Trust will terminate.

The Deed may also provide words that can lead one to believe this is not a Discretionary Trust but seems to offer vested rights to the beneficiaries. Confusion within a deed may result in lengthy litigation as you never know when a beneficiary, 3rd party, or spouse may litigate. The drafter must distinguish and ensure the correct terms get used throughout the Deed.

If you notice any outdated clauses in your Trust Deed, it is vital to correct this and consult a professional to ensure each term is 100% correct.

Reviewing a Trust

If you would like our team of TTS Trust Experts to review your existing Trust, we can assist you with this process.

To request a Trust review, please send a request via the button below.

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