In preparation for a panel discussion on trust and estate matters, I spent most of my day down the rabbit hole of research. And boy did I have fun! I can practically hear your eyes rolling in your head, but you can thank me later. Lucky for you, June is Trust month at Noble Prosperity, so my articles and podcasts will be geared to all things trusts.
So, let’s kick off with Trustee Powers
From personal experience, I can tell you that many of the things that go wrong with trusts starts with trustee powers, or rather the misinterpretation or ignorance of said powers.
In this article I address 3 common trustee errors
- Actions by trustees before authority
- Trustees’ power to delegate
- Trustee decisions
Actions by trustees before authority
It has happened that some transactions were concluded in the name of the trust prior to the Letter of Authority was issued for the trust. Unfortunately, transactions entered into prior to the date on the Letter of Authority of the trust will be void.
In the court case Moosa NO & others v Akoo & others [2010] JOL 25872 (KZP) actions by a trustee before authority were found to be void and therefore could not be ratified.
How do we ensure we comply?
- Do not enter into any agreements prior to the issue of the trust letter of authority
- Ensure resolutions are drafted and signed by all trustees to underpin the decisions passed by trustees
- Act in accordance with the trust deed
Trustees’ powers to delegate
Accepting the role as trustee is not a decision to be made lightly. As trustee you are expected to act with care, diligence and skill.
The Hoosen and Others NNO v Deedat and Others 1999 (4) SA 425 (SCA) case is authority for the principle that a trustee cannot delegate the exercise of his discretion and decision-making to another, and does not mean that the implementation of decisions properly taken by trustees cannot be delegated
How do we ensure we comply?
- Trustees must independently exercise their own discretion
- Trustees to act in accordance to the trust deed
- Trustees may not delegate the exercise of their discretion and decision-making to another
Trustee decisions
Many trust deeds make provision for majority vote. It is important to remember however that it is not the vote that binds the trust to decisions, but rather the resolution signed by all trustees.
In the court case Steyn NO and Others v Blockpave (Pty) Ltd (2959/2010) Oct 2010 it was decided that even if decisions are made by majority vote, all trustees must be informed and involved in the decision.
How do we ensure we comply?
- All trustees have to, at all times, act with the necessary care, diligence and skill legally required of a trustee (in terms of Section 9(1) of the Trust Property Control Act)
- All trustees have to be invited to participate in all decisions relating to the trust
- All trustees have to be given an opportunity to provide their views. Even if all trustees do not agree and a majority vote is allowed in terms of the trust deed, all trustees still have to sign each resolution of the trust.
