A trust should never be treated as a static structure. Ongoing reviews are necessary to confirm that it continues to operate within legal requirements and remains aligned with its intended purpose. The trust deed, in particular, requires periodic scrutiny. It sets out the rules governing the trust’s operation, and if it is outdated or misunderstood, it can lead to legally vulnerable decisions. Regular reviews help ensure that trustees are acting within their powers and fulfilling their obligations to beneficiaries.
Active and engaged trusteeship is the cornerstone of proper trust management. Trustees are expected to meet regularly to consider the affairs of the trust and make informed decisions. During the trustee meetings, attention should be given to the financial position of the trust, compliance with regulatory and tax obligations, distributions to be made during the financial year and the current and future needs of the beneficiaries. Meetings must be properly convened in accordance with the trust deed. Informal or undocumented decision-making undermines the integrity of the trust and can expose trustees to risks and penalties.
One of the most frequent weaknesses in trust administration is poor or incomplete documentation. Every trustee’s decision must be clearly and accurately recorded in resolutions and meeting minutes that have been properly drafted and signed. Resolutions, in particular, are extremely important when it comes to distributions to beneficiaries. Without proper records in place, the validity of the decisions can be challenged, and SARS may disregard them and tax the trust at 45% rather than the beneficiaries at their lower tax rate.
Trustees are expected to act with care and diligence, and in the best interests of beneficiaries at all times. Where trustees fail to maintain proper governance standards, they can be held personally accountable. This can include liability for penalties, financial losses or regulatory sanctions. Trustees must demonstrate through proper records and processes that they have fulfilled their responsibilities.
Considering the above, it is evident that a well-managed trust is one that is actively reviewed, maintains accurate records, and makes legally sound decisions, which is a fundamental requirement for trusts. If you are uncertain whether your trust is properly managed, please feel free to contact our Trust Office team, which specialises in trust administration and compliance.
Disclaimer: This article is the personal opinion/view of the author(s) and does not necessarily present the views of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever, and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken based on this content without further written confirmation by the author(s).
