Can I amend my Trust Deed?

A trust is an agreement between the founder of the trust and the trustees of the trust for the benefit of a third party, namely the trust beneficiaries of the trust. Different to a company, a trust is not established in terms of legislation, but is established by the trustdeed of the trust which serves as its founding document.

A trust is an agreement between the founder of the trust and the trustees of the trust for the benefit of a third party, namely the trust beneficiaries of the trust. Different to a company, a trust is not established in terms of legislation, but is established by the trustdeed of the trust which serves as its founding document. In essence it takes on the form of a contractual arrangement between the firstmentioned parties.

The trustees of a trust are only mandated to execute functions on behalf of the trust in terms of the trustdeed and the trustdeed must be looked at for guidance as to how it may be amended if such a need arises. For example, the trustdeed restricts the trustees from purchasing fixed property, but the main purpose for which the trust was established necessitates this right. Clearly the trustdeed must be amended to allow for this purpose.

In general there are three ways to amend a trustdeed:

Option 1
The founder and trustees conclude an amendment agreement in which the proposed amendments to the trustdeed are contained. Where a beneficiary has already received benefits from a trustdeed, he is deemed to be a party to the original agreement and must now also be a party to the amendment agreement.

It is important that all the original parties to the trustdeed consent to the amendment. Where the founder of the trust has passed away prior to the amendment, the trusteed will not be capable of amendment in this manner.

Option 2
The trustdeed is amended in accordance with the variation clause of the trustdeed. Usually such a variation clause determines how changes to the trustdeed must be done. This variation clause may differ from trust to trust and must receive specific attention when establishing the variation requirements contained in a specific trustdeed.

In the event that the trustdeed does not contain a variation clause, the trustdeed will need to be amended using one of the other two options as discussed herein.

Option 3
The trustdeed is amended by way of a court application. Amendment by court application will be the most appropriate option where both Option 1 (the founder has already passed away) and Option 2 (there is no variation clause in the trustdeed) cannot be used to amend the trustdeed.

It is important to obtain specialist legal advice at the initial drafting of a trustdeed to ensure that the trustdeed is drafted correctly with valid and executable provisions in order to avoid future problems with amendments of the trustdeed.

March 19, 2012
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