Trusts have recently come under the spotlight from a SARS perspective. With the recent amendments, it is important for a trustee to fully understand their role and responsibilities. Although a trustee may not act in the capacity of trustee until he/she has received a letter of appointment from the Master, he/she is still liable for any unlawful act committed in the handling of trust affairs prior to the issue of the letters.

Once a trustee has accepted the position and is authorised to act, the trustee must act at all times in the best interests of the trust’s beneficiaries and fulfil all duties in terms of the trust deed and the law. A trustee may not be negligent when performing their duties. A trust itself cannot be sued as it is not recognised as a legal person in South Africa (unless a statute defines it as such). It is the trustees in their official capacity who can be sued.

An indemnity clause in the trust deed which exempts trustees from liability for breach of trust is void and does not exempt a trustee from actions involving ordinary or gross negligence or intentional wrongdoing. Criminal liability may be imposed on a trustee who commits a crime e.g. theft or fraud in the course of the trust administration.

Trustees are jointly and severally liable for damages (delict). Beneficiaries or third parties (e.g. creditors) who have suffered a loss as a result of breach of trust are entitled to bring a damages claim against the trustees. Trustees can be sued by beneficiaries for damages if they act negligently (even if they act in good faith) and/or if they intentionally act wrongfully. A co-trustee who was not involved with a breach of trust may nevertheless be liable for any wrongful action of another trustee if the “innocent” trustee’s ignorance and/or inactivity is causally connected to the damage incurred. For example: where the “innocent trustee” is aware of a breach of trust by co-trustees but does not report it, or where the “innocent trustee” improperly allows trust funds to remain in the sole control of co-trustees.

Being a trustee is no light matter. If you are a trustee and would like to find out more about your roles and responsibilities please feel free to contact us for professional advice in this regard.

Article by: The Independent Wealth Managers Team