Since the Land and Agricultural Bank of South Africa vs J L Parker and Two Others 2005 (2) SA77 (SCA) case the debate and noise levels around the need for an independent trustee has increased. The SCA indicated that various Masters of the High Court should ensure that family trusts are not controlled solely by family members who are the beneficiaries.
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.
Stellentrust 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 Stellentrust 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.