A Trustee is responsible for managing all of the property owned by a trust for the benefit of the trust beneficiaries. The exact duties of a Trustee will vary based on what assets are owned by the trust. For example, if the trust consists of bank and investment accounts, then the Trustee will be responsible for overseeing these accounts. Or, if the trust owns rental real estate, then the Trustee will be responsible for managing the rental property.
The Trustee can, depending on state law and the terms of the trust agreement, delegate certain duties to others, such as hiring a financial advisor to oversee investments or hiring a property manager to oversee rental real estate. But the Trustee must use good judgment and due diligence when delegating duties and must also avoid any conflicts of interest (such as hiring a sibling as the trust's investment advisor) unless the beneficiaries consent.
An independent trustee is a person who cannot benefit from the income or assets of the trust, nor are they related to a beneficiary of the trust, and can thus play a crucial role in the proper separation between ownership of the trust assets and the enjoyment thereof.
In a landmark case in 2005 – Land and Agricultural Bank of South Africa v Parker – the Supreme Court of Appeal ruled that there was no proper separation of ownership or control of the trust assets from their enjoyment or use. As the trustees are entrusted with the control of the assets in the interest of the beneficiaries, inadequate separation may result in the trust being regarded as an extension of the estate of the founder.
The court suggested the appointment of at least one independent outsider as trustee to every trust where all the beneficiaries are related to one another, which resulted in the Master of the High Court enforcing the principle and requiring all newly formed family business trusts to appoint at least one independent trustee.
A simple definition of an independent trustee is someone who is not related to the founder or trustees and who has no beneficial relationship with them. This should ensure adequate separation of control from enjoyment. A trustee must not be swayed to support any decisions of the founder or co-trustees for fear of losing fees. A trustee who is also a service provider of the trust should be subject to the scrutiny of an independent trustee to ensure everything is undertaken at arms’ length and to maintain due care and diligence.
Louwrens Koen Attorneys will consider the appointment as independent Trustee in existing and new trusts to assist founders and Trustees with compliance in respect of the following:
- Trust Property Control Act.
- Income Tax Act.
- Other relevant legislation.
- Compliance will focus on:
- Satisfying the terms of the Trust Instrument;
- Guiding the Trustees on their rights, powers and responsibilities;
Ensuring that proper records are kept as regards:
- Trustee meetings, minutes of such meetings and resolutions;
- Trust documents;
- Annual financial statements;
- Annual tax returns;
- Amendments to the Trust instrument and Trustees as and when required;
- Ensuring that the investment of the Trust Capital is undertaken in a prudent and professional manner having regard to the needs of the beneficiaries, the term of the Trust and investment powers contained in the Trust instrument;
- Ensuring that the interests of one class of beneficiaries (income) does not outweigh the interests of another class (capital). This requires a balance between the production of income and the preservation of capital;
- Ensuring that the Trustees disclose any potential conflict of interest and manage any such potential conflict in accordance with the Trust instrument;
- Fulfilling the role of an honest broker where there may be competing interests between beneficiaries;
- Keeping the Trustees abreast of any changes in the relevant legislation and also informed about relevant Court Rulings;
- Ensuring that the objectives of the Trust are satisfied in accordance with the Trust instrument; and
- Risk management in general.
Whilst Louwrens Koen Attorneys will not actively manage trust investments, it will guide the Trustees on an appropriate mandate for any investment manager appointed and assist the Trustees with a watching brief over the performance of the trust investments in accordance with the mandate given to any investment manager.
Louwrens Koen Attorneys act as Independent Trustee for your Family Trust at a reasonable Fee.
Contact us on 0870010733 or email@example.com for further information.