Introduction Link to heading
Trusts are powerful legal structures used for estate planning, asset protection, and family wealth management. But in South Africa, many people form trusts without fully understanding the responsibilities that come with them, especially for trustees.
In this article, I explain the basics of how trusts work, what trustees are legally obligated to do, and the risks of mismanaging a trust.
What Is a Trust? Link to heading
A trust is a legal relationship where a founder transfers assets to one or more trustees, to manage those assets for the benefit of beneficiaries. It is governed by the Trust Property Control Act 57 of 1988.
Trusts can be used for:
- Estate planning (reducing estate duty and protecting assets)
- Providing for minor children or dependents
- Protecting business or family wealth across generations
Types of Trusts Link to heading
- Inter vivos trust: Created during the founder’s lifetime (e.g., family trust)
- Testamentary trust: Created in terms of a will and comes into effect upon death
- Discretionary trust: Trustees have discretion on how to allocate benefits
- Vesting trust: Beneficiaries and their rights are fixed from the start
Trustees: Legal Duties and Risks Link to heading
Trustees are the legal custodians of the trust’s assets. Their duties include:
- Acting with honesty, diligence, and skill
- Keeping proper financial records and accounts
- Acting in the best interest of beneficiaries
- Complying with the Trust Deed and Trust Property Control Act
- Submitting annual returns and financial statements
Failure to act properly can result in personal liability, removal as trustee, or even criminal charges.
Common Pitfalls in Trust Management Link to heading
- Using trust assets for personal expenses
- Failing to hold trustee meetings or record decisions
- Not understanding the Trust Deed
- Failing to register with SARS or submit tax returns
- Ignoring the Master’s Office compliance requirements
Best Practices for Trustees Link to heading
- Keep detailed records of meetings, decisions, and financials
- Consult with professionals (legal, tax, accounting) regularly
- Avoid conflicts of interest and document all transactions
- Ensure all actions are authorised by the Trust Deed
- Review the trust’s structure and purpose annually to ensure relevance
Final Word Link to heading
Trusts are useful legal tools—but only when managed properly. Trustees are fiduciaries, not figureheads, and must take their role seriously.
If you’re a trustee, or thinking of setting up a trust, make sure you understand the responsibilities involved. Sound trust governance is essential to protecting both the assets and the integrity of the arrangement.
Contact Link to heading
Need help setting up a trust or training trustees on their legal duties?
I assist clients with trust formation, compliance, and trustee advisory services.
Peet Roodt | Legal & Compliance Adviser