Phia van der Spuy. File Image: IOL
Phia van der Spuy. File Image: IOL

Perpetual existence of trusts a core benefit

By Phia van der Spuy Time of article published Jul 18, 2019

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JOHANNESBURG - A trust has a perpetual existence that is not attached to the life of any person, similar to companies and close corporations.

The fact that trusts can exist for generations is one of their core benefits. There are no rules that restrict their perpetuity, although it has been found that most are de-registered after two generations of being handed down.

A trust will end at a time or upon an event specified in the trust instrument.

This is dependent on the wishes of the founder, which should be duly reflected in the trust instrument.

It is important that the founder ensures that his/her wishes are reflected accurately in preparation for a time when they no longer live and are therefore unable to influence decisions.

Typically, trustees are given discretionary powers to either extend the termination date of the trust, or to terminate it under specific circumstances.

Typical reasons would be:

Assets have been fully distributed, making it uneconomical, monies remaining make it uneconomical to continue and that the trust has served its purpose in terms of its stated objective (for example, a family trust's objective is to benefit the stated beneficiaries).

Others would be that all the beneficiaries are deceased and trustees have been given authority to deregister.

Regardless of the stipulation in the trust instrument, Section 13 of the Trust Property Control Act allows a “trustee or any person” having “sufficient interest in trust property” to apply to the courts to end a trust where provisions are against the public interest or jeopardise the beneficiaries’ interests or the trust's objective.

The Master of the High Court can only deregister a trust when it has received reasons for termination of the trust or, where applicable, the original signed resolution terminating it.

The resolution must state whether the trust was dormant or active, a bank account opened in the name of the trust and, if so, that it had been closed.

The original letters of authority include bank statements reflecting a nil balance, the final bank statements, or a letter from the bank confirming that the account had been closed.

If the trust did not have a bank account, the trustees must confirm proof that the beneficiaries have received their benefits; and an affidavit from the trustees confirming that the trust has been divested of all assets.

Many of the older “vanilla” trust instruments stipulate that the trust will terminate upon the death of the founder, without this being the actual intention of the founder.

It is often the case that the trust founder does not read and fully comprehend the trust instrument before signing it, and as such, it does not reflect his/her true wishes.

Failure to read and fully comprehend the trust instrument can have dire consequences for future generations, with the objective of creating the trust being defeated, resulting in a legacy that should have been preserved for generations being lost.

If you are unsure about the termination date of a trust, search for the termination clause in the trust deed (if such a clause exists) and ensure that it reflects the original intentions of setting it up.

For example, if you created a trust to leave a legacy, the termination clause should stipulate that it will not terminate upon your death.

Phia van der Spuy is a registered Fiduciary Practitioner of South Africa®, a Master Tax Practitioner (SA), a Trust and Estate Practitioner (TEP) and the founder of Trusteeze®, a professional trust practitioner.


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