Section 21 of the Trust Property Control Act 57 of 1988 (“the Act”) allows trustees to resign at any time provided that written notice is given to the Master of the High Court as well as to ascertained beneficiaries with legal capacity. It is important to note that a failure to inform the identifiable beneficiaries may result in the resignation being regarded as invalid. Although notifying co-trustees is not a requirement under the Act, it is considered good practice.
Section 21 of the Act applies to both inter vivos trusts and testamentary trusts. As a trustee of either type of trust, you could resign if the necessary processes outlined in the Act are followed and complied with. However, the resignation process does not take immediate effect upon submitting the resignation documentation to the Master of the High Court. The resigning trustee may remain accountable as trustee of the trust until the Master of the High Court issues a new Letter of Authority for the trust. Such continuity of accountability is crucial during this transitional period, ensuring a smooth handover of responsibilities.
Common misconceptions suggest that a trustee can only resign with the consent of other parties involved in the trust or those mentioned in the trust deed. In the 2012 case of Meijer NO and another v Firstrand Bank Limited (Formerly Known as First National Bank of Southern Africa) and another In re Firstrand Bank Limited (Formerly Known as First National Bank of Southern Africa) v Meijer NO and others [2013] JOL 30560 (WCC), the Court ruled that the entitlement to resign, however, is not subject to the Master’s or the Court’s permission. Therefore, a trustee has the right to resign at their discretion, with no restrictions preventing them from continuing in their role if they so choose. Nonetheless, a resigning trustee needs to adhere to the correct procedures to ensure a proper and effective resignation process.
Inter Vivos trusts
There are slight variations in the resignation process for trustees of inter vivos trusts compared to testamentary trusts, as each type of trust is governed by distinct legal frameworks. Understanding these differences is vital for trustees to fulfil their fiduciary responsibilities effectively. When dealing with either an inter vivos or a testamentary trust, trustees should carefully consider the trust deed’s contents, any amendments to the trust deed and/or the will.
Inter vivos trusts are primarily regulated by the Act and the relevant trust deed. The resignation process begins with a meticulous review of the trust deed to identify any specific provisions related to resignation. While a trustee can resign regardless of whether the trust deed permits it, they must follow the process outlined in section 21 of the Act. Following the written resignation, a successor trustee must be appointed in the place of the resigning trustee should the trust deed contain a limitation on the number of trustees to act on behalf of the trust.
Testamentary trusts
On the other hand, testamentary trusts are governed by multiple statutes, including the Estate Duty Act 45 of 1955, the Wills Act 7 of 1953, and the Act. The resignation process for a testamentary trust requires a careful review of both the will, the wishes of the deceased and the trust deed for resignation provisions. In many instances, obtaining court approval becomes necessary, particularly in situations involving disputes between the parties or ambiguities within the will relating to the resignation procedure. In circumstances where the will does not provide clear guidance on resignation or if disputes arise, the outgoing trustee may need to seek court approval.
Our Courts can provide clarity and appoint a successor trustee in ambiguous situations, ensuring effective trust administration. However, the trustee intending to resign must still inform beneficiaries, co-trustees, and additionally the executor of the estate, and a successor trustee must be appointed. The formal notification of resignation that must be communicated to beneficiaries and co-trustees, must detail the effective date and information regarding the successor. Given that a resignation can significantly impact trust administration, a smooth transition is crucial for maintaining continuity in asset management and addressing the needs of beneficiaries. The resignation must also be formally executed in writing.
In summary, while there are minor differences in the resignation procedures for inter vivos trusts and testamentary trusts, resignation is permitted in both cases. It is crucial for trustees to understand the statutory law, common law, and fiduciary requirements involved in the resignation process. Maintaining open and transparent communication with all parties involved is essential and estate planners should consider including a resignation clause in the trust deed or will to outline the resignation procedure in the event a trustee chooses to resign.
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