TGC Talks: Trust and Trust Obligations or Structures

Trusts are widely used in South Africa for estate planning, asset protection, business continuity, and tax planning. However, managing a trust isn’t just about creating a legal structure—it involves understanding a range of obligations, governance principles, and compliance requirements.

In this article, we break down the concept of trusts, explore various trust structures, and outline the key responsibilities that come with managing a trust. Whether you’re considering establishing a trust or are already a trustee, this guide will help you understand what it takes to stay compliant and protect the interests of beneficiaries.

What is a Trust?

A trust is a legal arrangement where one party (the founder) transfers assets to another party (the trustee), who then manages those assets for the benefit of a third party (the beneficiary). The trust is governed by a legal document known as a trust deed.

In South Africa, trusts are typically governed by the Trust Property Control Act (Act 57 of 1988), and the Master of the High Court has authority over their registration and administration.

Common Trust Structures in South Africa

There are three main types of trusts in the South African legal system:

1. Inter Vivos Trust (Living Trust)

• Created by a trust deed during the lifetime of the founder.
• Often used for estate planning or business structuring.
• Trustees begin managing the trust immediately.

2. Testamentary Trust

• Comes into effect upon the death of the founder, as stipulated in a will.
• Commonly used to protect assets for minor children or beneficiaries unable to manage their own finances.

3. Business/Trading Trust

• Used for operating business activities.
• Income generated may be taxed in the trust or in the hands of the beneficiaries, depending on distribution.

Parties Involved in a Trust

• Founder: The person who establishes the trust.
• Trustees: Individuals or entities responsible for managing the trust.
• Beneficiaries: Those who benefit from the trust assets.
• Master of the High Court: Oversees compliance and governance.

Key Trust Obligations

Managing a trust involves more than simply holding assets. Trustees are subject to a variety of fiduciary and legal duties:

1. Fiduciary Duty

Trustees must act honestly and in the best interest of the beneficiaries. They may not use trust assets for personal gain or act in conflict with the trust deed.

2. Proper Record-Keeping

All financial transactions and trustee decisions must be properly documented. Annual financial statements are typically required.

3. Tax Compliance

Trusts must be registered with SARS and are subject to taxation, including income tax and capital gains tax. Submissions must be timely and accurate.

4. Reporting to the Master of the High Court

Trustees are often required to report major changes or submit documentation to the Master, such as new trustee appointments or updates to trust deeds.

5. Maintaining Independence

Trustees must avoid bias, favouritism, or acting under external influence, ensuring that decisions are made in line with the trust’s purpose.

Why It Matters

Mismanaging a trust can lead to legal disputes, penalties, and even removal of trustees. Understanding your obligations and ensuring compliance not only protects the trust assets but also the integrity of the individuals managing them. Working with a professional accounting and advisory service like The Glass Castle ensures you have the guidance you need to maintain the legal standing of your trust.

Trusts can be powerful tools for protecting wealth and ensuring future financial stability—but only if managed correctly. At TGC, we provide expert trust administration, compliance support, and accounting services to help you remain in good standing. Let our team walk you through the complexities of your trust, so you can focus on what matters most: building a legacy.