The Department of Justice and Constitutional Development has listened to the fiduciary industry and now done all that is necessary to remove the confusion surrounding the payment for registration of trust deeds at the Master’s Office.

The latest Government Gazette carries the necessary proclamation amending the regulations to the Trust Property Control Act to remove any reference to payment by way of revenue stamps. From Friday 5 November, payment for the registration of trusts or certified copies of documents already lodged with the Master’s Office can be made at a magistrate’s court or by direct bank deposit.

Secretary of the Fiduciary Institute of South Africa, Aaron Roup, says: “We welcome the outcome. A week of confusion could have been avoided had the authorities addressed the issue months ago.”

The Department of Justice and Constitutional Development moved last Friday to resolve the confusion surrounding the use of revenue stamps as payment for registering trust deeds at the Master’s Office, but the Fiduciary Institute of South Africa (FISA) says the proposed solution is inadequate.

The Stamp Duties Act was abolished with effect from 1 November 2009, but no alternative payment measures had been put in place for registering trust deeds and obtaining certified copies of documents already lodged with the Master’s Office.

A directive from the justice department on Friday made provision for payment at the cash halls of magistrates’ courts or, more conveniently, by direct bank deposit. FISA welcomes this development but points out that trust registrations paid for in this manner are not legally valid until the existing regulations to the Trust Property Control Act are amended to remove any reference to payment by way of revenue stamps.

FISA secretary Aaron Roup says: “This is a simple procedure which requires the signing of a proclamation by the Minister of Justice followed by publication in the Government Gazette. FISA is willing to help draft such a proclamation.”

Confusion surrounding the use of revenue stamps for payment of registration of trust deeds and requests for certified copies of documents already lodged with the Master’s Office will lead to delays and inconvenience for the public from Monday. This is the view of the Fiduciary Institute of South Africa (FISA), which has repeatedly called for clarity since March 2009, but no solution was provided in today’s Government Gazette as had been hoped for.

The Stamp Duties Act was initially abolished with effect from 31 March 2009, but this date was extended to 31 October 2009, to allow time for government departments using revenue stamps to introduce alternative measures.

The deadline is imminent but the Master’s Office of the High Court and the South African Revenue Service (SARS) have failed to propose how documents such as trust deeds can be lodged, and the registration fee, as stipulated in the regulations to the Trust Property Control Act, can be paid. Without the relevant legal authority to transact, members of the public and fiduciary practitioners, acting as nominees for corporate trustees of trusts awaiting registration, will be prevented from transacting in the name of the trust, thereby causing delays and jeopardising possible transactions involving the trust. This could in turn lead to financial losses being incurred by the trust, based on the delay in issuing the legal documents to effectively administer the trust.

The abolition of stamp duty is likely to have a major impact on the Master’s Office, which is already in administrative chaos.

FISA Secretary Aaron Roup said: “The situation is untenable, almost Kafkaesque. At issue is how to transact with the Master’s Office in order to register a trust deed. The Stamp Duties Act no longer exists and the regulations to the Trust Property Control Act state that the only way to register a trust is to affix revenue stamps of R100 for the deed and R4.50 for a certified copy. Yet from Monday, such stamps may no longer be used and franking machines will be decommissioned by law.

“What needs to have happened was a revocation or amendment of the relevant clauses in the regulations attached to the Trust Property Control Act, which would be by simple proclamation in the Government Gazette. Even if this had been done – which it has not – the solution is inadequate: if an extension were granted for the use of stamps and franking machines, there is no longer stock available; if the clauses were revoked such that only cash transactions may be done at the Master’s Office, who will audit the cash box? Apart from long queues there is the also the inherent risk of fraud being perpetrated in respect of the management of the new payment system.”

FISA called on SARS and the Master’s Office to offer urgent clarity.

The Fiduciary Institute of South Africa (FISA) estimates that only ten percent of the South African population has a will. FISA, which represents R200 billion of fiduciary assets, has a vision for every South African to have a will regardless of the size of their estate.

Speaking at a presentation in Johannesburg, FISA EXCO member Graham McPherson said there are currently fewer than 5 million wills registered in South Africa. The number of valid wills may be even lower as many people have more than one will in circulation.

Of total reported adult deaths, an estimated 70% comprise estates worth less than R125 000, which are dealt with by the Administration of Deceased Estates Act, and do not require a professional executor unless stated in a will. The remaining 30% of adult deaths are estates worth in excess of  R125 000, for which the Master of the High Court requires a full executor appointment which may or may not have been provided for in a will.

McPherson said: “A will clarifies the devolution of assets to family members at a time of grief. A will is not only an instrument in estate planning for high – net -worth individuals. If every South African had a will, this would reduce the number of intestate estates to be administered. A Will can furthermore be invaluable in guiding trustees of retirement funds in determining dependants when deciding on death benefit distribution in terms of Section 37C of the Pension Funds Act. Over time, this could make an impact on the large number of unclaimed benefits in the country.

Through its practitioner training and consumer awareness programmes, FISA is tackling the need to educate and inform the public about the importance and intricacies of a will. Individuals need to know that their marital regime takes precedence over their will and that ongoing legislative and tax changes mean that a will needs to be reviewed ideally once a year.

McPherson outlined the dangers of do- it -yourself wills, and advised individuals seeking advice to consult FISA-accredited practitioners. He emphasized the importance of an Executor, pointing out it is your life’s financial worth that you entrust to an executor to attend to. Executor’s Fees are determined by statute, but can be negotiated and the public needed to be aware of this.

Wills are merely one aspect of estate planning and administration. FISA, which grew out of the Association of Trust Companies, has a broad mandate within the fiduciary industry in South Africa to raise standards and protect the public. FISA members include any practitioner with a fiduciary responsibility, such as lawyers and accountants active in estate planning, and taxation and financial advisers looking after clients’ assets.

FISA Chairman, Franklin Dikgale, said FISA is working at improving standards in estate administration. It is working with the SA Law Commission to streamline and update the Administration of Deceased Estates Act and attending to processes that delay the winding up of estates. In this regard, FISA is working with each of the Master’s Offices countrywide to standardize requirements and improve turnaround times as well as with institutions such as SARS, banks and Computershare.

 Over the past number of years, the fiduciary industry in South Africa has undergone serious change. Legislation has been passed to regulate the financial services industry, such as FICA and FAIS. What ten years ago seemed to be a straightforward industry in which to practise has now become highly specialised, with experts required in specific fiduciary areas to give clients what they have a right to expect, which is sound advice based on best practice.

One of the financial planning tools used over the years has been the intervivos trust, a trust created during the lifetime of the founder. In the initial stages of using such trusts, it was common practice to appoint the founder and his or her spouse as the trustees of the trust. However, over time, cases have been brought before the courts dealing specifically with the issue of trustees in trust (Landbank v Parker), which has resulted in the Master of the High Court, the custodian of all trust matters in the Republic of South Africa, determining that where trusts have only husband and wife as trustee, a further appointment of a third, independent trustee is called for. This independent trustee could be an attorney, accountant, auditor, or a professional trustee such as a corporate member of the Fiduciary Institute of South Africa (FISA).

If you are appointed as a trustee, you need to be fully conversant with the role, duties and obligations of the position. Following below is an overview of the role and duties of a trustee, together with some court cases involving trusts and trustees.

The starting point is the duty of trustees to exercise their powers, in the best interests of the present and future beneficiaries of the trust, holding the scales impartially between different classes of beneficiaries. This duty of the trustees towards their beneficiaries is paramount. “They must of course obey the law but, subject to that, they must put the interests of their beneficiaries first.” – Sir Robert Megarry in Cowan v Scargill ([1984] 2 All ER (Ch. D)

The duties of a trustee include the following

• Know and understand the contents of the trust instrument appointing him or her
• Have in-depth knowledge of all relevant fundamental law governing trustees, which includes but is not limited to the Trust Property Act 57 of 1988, the Immovable Property Act 94 of 1965, the Income Tax Act 58 of 1962, the Estate Duty Act 45 of 1955, the Matrimonial Property Act 66 of 1984, the Marriage Act 25 of 1961, the Civil Union Act 17 of 2006, the Customary Marriages Act 120 of 1998 and the Divorce Act 70 of 1979;

• Have a working knowledge of the law of contract, property and domicile
• Be familiar with prudent investment vehicles, both onshore and offshore
• Have knowledge of foreign exchange control regulations
• Have knowledge of the Financial Services Board (FSB) and its reporting requirements
• Be aware of the Domestic Partnerships Bill, gazetted on 14 January 2008
• Keep accurate and detailed minutes of trustee meetings, proper resolutions and comprehensive records
• Act with due care and utmost diligence
• Act only in the best interests of the trust
• Act impartially and independently.

A trustee may not

• Act contrary to the contents of the trust deed
• Act without his or her appointment being accepted by the relevant office of the Master of the High Court
• Act strictly in anything but the best interests of the trust
• Disregard the rights of any beneficiary
• Fail to ascertain the rights and obligations that his or her office entails
• Endanger or expose to risk, any or all of the trust assets
• Intermingle any of the trust assets with assets belonging to the personal estate of the trustee(s)
• Treat any trust property as that of his or her own
• Fail to maintain comprehensive records of all matters relevant to the smooth running of the trust
• Withhold decisions taken from the other trustees and beneficiaries
• Rely on, or be subservient to, any dominant co-trustee
• Receive any secret benefit from the trust
• Observe anything other than utmost good faith and integrity
• Act without the necessary agreement of his or her co-trustees.

With due regard to the points raised above, it is interesting to note that the courts have, in many instances, been asked to rule on matters involving trusts, the assets within the trust and, finally, the actions or perceived actions of the trustees.

Some of the court cases involving the above are referred to below and each case makes for interesting reading in itself.

When is a trustee authorized to act?

Simplex (Pty) Ltd v van der Merwe and Others 1996 (1) SA 111 (W)

A trust was prepared to facilitate a specific transaction.

Documentation was signed in haste before the trust was registered.

s 6(1) of the Trust Property Control Act 57 of 1988

…any person whose appointment as trustee in terms of a trust instrument . . . shall act in that capacity only if authorised thereto in writing by the Master’. The words ‘shall . . . only’ are clearly of a peremptory nature, indicating an unambiguous prohibition on acting as trustee until authorised thereto in writing by the Master

The Court cannot validate acts which are expressly prohibited by statute: to do so would be to arrogate to the Court the power to override valid legislative Acts. The Court accordingly does not have the power to validate a contract concluded by a trustee in conflict with s 6(1) of the Act.

It follows that a trustee may only act once he or she is in possession of Letters of Authority.

The need to keep accurate records and act in good faith

Doyle v Board of Executors 1999 (2) SA 809 (C).

A trust was created in 1949 with Mrs D as the income beneficiary.

Her son was to become the capital beneficiary on her death.

Mrs D died in 1994 whereupon the son demanded a full and complete accounting from the date that BoE was appointed as trustee, which was in 1951.

BoE argued that it was only the income beneficiary, Mrs D, who had been entitled to this accounting, the son only becoming entitled to the accounting as at the date of Mrs D’s death.

The Court disagreed and found that the son was entitled to have knowledge every step of the way as to how the trust capital had been invested and re-invested.

The trustee was required in good faith to account fully to the capital beneficiary, with supporting vouchers, for all transactions of the trust, going back to 1951.

It follows that accurate accounting records, minutes of meetings and resolutions of decisions are vital.

It follows further that a trustee must be fully transparent at all times.

In summary, the role of a professional trustee is not to be undertaken lightly. If you are invited to fulfill such a role, make sure you understand the implications. If you are needing to appoint a professional trustee yourself, a good starting point is to seek a FISA – registered practitioner, who is required to adhere to minimum fiduciary industry standards.