The newly introduced Trust Property Control Act has been a long-awaited development in our jurisdiction. Before the Act, Trusts were governed by common law principles, with the popular trust instrument being the Notarial Trust Deed. The preamble of the Act states that its purpose is “to regulate the control of Trusts; and to provide for matters connected therewith.”
As a starting point, it is prudent to have a working definition of a trust. A trust is an estate planning tool or legal entity created to hold assets on behalf of identifiable beneficiaries. Further to this, the Act has introduced the concept of ‘trust instruments’ which are defined as “a written agreement, testamentary writing, court order or a notarial deed according to which a trust is created”. By implication, this means the notion of ‘trusts’ as we knew it has been expanded to cover other forms of trust instruments.
Below are the essentialia of a valid trust. This list is, however, not exhaustive. It is designed to highlight the pertinent elements of a valid trust under our law.
The essential elements are thus:
- Intention to form a trust by a founder / donor and relinquish control over assets;
- The instrument must be in writing;
- It must be registered with the Master of the High Court;
- Property held by the trust must be clearly identified;
- The objectives of the trust must be clear;
- The beneficiaries must be clearly identifiable;
- Trustees must be approved by the Master of the High Court; andTrustees may be required to provide security for performance of duties to the Master, unless otherwise exempted.
The Act has made the Master of the High Court instrumental in the administration of trusts. Previously, the founder / donor had the liberty to elect whoever they wished as a trustee.
A welcome development is that a Will is a recognised trust instrument. During the lifetime of the testator, a Will is a testamentary trust, but with the inclusion of a trust clause the Will can be converted into an inter vivos trust (after death). It is therefore critical that the Will is valid in form and content as its conversion into an inter vivos trust is dependent on its validity as a Will. This therefore means that clients will no longer need to have both Wills and Trusts separately.
The advantages of a trust outweigh its disadvantages, if any. Due to the fact that they are deemed in law to be a separate legal entity from the founder / donor, beneficiaries and trustees, trusts allow for continuity. Assets are protected as the trustees are expected to uphold the highest fiduciary standards in their custodianship. Further to this, trusts stand to benefit from the expertise of trustees where the skills of a trustee are within the field of the particular trust.
A cost-benefit analysis is necessary before anyone decides to form and register a trust. The value of the assets held in trusts should not be lower than the administrative costs of registering the instruments and retaining trustees. Trusts remain a relevant, valuable tool in wealth management.