Many people are involved in trusts inter vivos in the capacity of trustee. It is our experience that many of these trustees are not educated for this role. Almost every trustee we came across did not know or understand some or all of the following:

• the basic principles of a trust;
• the content of the trust document;
• the legal and common law duties of trustees;
• the accounting and taxation rules for trusts; and
• how the trust fits in their overall estate plan.

This article aims at discussing the duties of trustees in lay man’s terms.

The Trust Property Control Act, No 57 of 1988, regulates the control of trust assets. The act defines a trust as the arrangement through which ownership in property of one person is made over to another person, the trustee, by virtue of a trust instrument.

The act defines a trustee as any person who acts as trustee by virtue of an authorization given in writing by the Master. There are thus no qualifications a person has to meet in order to be a trustee. The following persons, however, are disqualified to act as trustees:
• a minor or a person who lacks contractual capacity;
• persons who are prohibited to act as trustee in terms of other legislation;
• persons who have been convicted in the Republic or elsewhere of any offence of which dishonesty is an element or of any other offence for which he has been sentenced to imprisonment without the option of a fine;
• persons whose estate is sequestrated or liquidated or placed under judicial management;
• persons who have been declared by a competent court to be mentally ill.

In terms of the act the duties of the trustee are as follows:

1. The trustee must lodge the original trust instrument and any variations thereof with the Master;
2. The trustee must furnish his address to the Master and any changes of address within 14 days to the Master;
3. The trustee must administer or dispose of the trust property according to the provisions of the trust instrument for the benefit of the beneficiaries designated in the trust instrument;
4. The trustee must perform his duties and exercise his powers with the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another (Sec 9(1) of the Act);
5. The trustee must deposit any trust money in a separate trust account at a banking institution;
6. The trustee must indicate clearly in his bookkeeping the property which he holds in his capacity as a trustee;
7. The trustee must register trust property or keep it registered in such manner as to make it clear from the registration that it is trust property;
8. The trustee must, at the written request of the Master, deliver to the Master any book, record, account or document relating to his administration or disposal of the trust property and shall to the best of his ability answer honestly and truthfully any question put to him by the Master in connection with the administration and disposal of the trust property;
9. The trustee shall not without the written consent of the Master destroy any document which serves as proof of the investment, safe custody, control, administration, alienation or distribution of trust property before the expiry of a period of five years from the termination of a trust.

We need to expand on the administration of trust assets and the due care, diligence and skill with which the trustee has to perform his duties.

Provisions of the trust instrument
The trustee has to acquaint himself in detail with the provisions of the trust deed. He needs to understand the nature and extent of his powers and duties and a detailed study of the trust document is necessary. As the trust instrument is a legal document, it is imperative that the trustee consult a knowledgeable attorney (preferably the attorney who drafted the document) so as to acquaint himself with the meaning, implications and the effect of every clause in the trust document. Ignorance would be no excuse!

Due care, diligence and skill
The act requires from the trustee a higher standard of conduct than when he manages his own affairs. He is in fact managing the affairs of another and he is responsible to the beneficiaries for his actions. The trustee should therefore ensure that there is no conflict between his personal interests and that of the trust. He must always act in good faith and to the benefit of the beneficiaries.

Section 9(1) of the Act does not leave any room for negligence in the performance of his duties by the trustee. An attempt to exempt the trustee from liability for negligence is not in the spirit of the Act and therefore void. We have seen many examples where the so-called independent trustee attempts to avoid liability for negligence by having the other trustees signing a document indemnifying the independent trustee from any claims. Why do they offer their services as trustees (and charge a fee) if they are not prepared to accept any liability? I have also seen instances where the independent trustee gives the other trustees a power of attorney to act on his behalf. Again, this action may jeopardise the very reason of having a third, independent trustee, Section 3(3)(d) of the Estate Duty Act.

Then lastly, no documents or records of a trust may be destroyed without the written consent of the Master. This may have the effect that records and documents of trusts have to be kept indefinitely! Ensure that your record keeping is up to date.