AUTHOR: STEVEN JONES
When can the provisions of a trust deed be set aside? When you don’t stick to the rules
FAR TOO many people pay their accountant or attorney a visit, draw up a boilerplate trust deed, sign on the dotted line, and think that this piece of paper will take away all their tax and estate duty problems. No, it won’t. In fact, setting up a trust for the wrong reasons, or not understanding the legal implications of what a trust entails, could end up costing you a great deal of money for very little benefit. It could even cause you to lose money.
In a 2004 court case heard by the Supreme Court of Appeal, namely Land and Agricultural Bank of South Africa v Parker SA 186 / 2003, Cameron JA outlined some important legal principles concerning the status of trusts and those who are involved with trusts.
A trust is bound by its constitution
Except in cases where statute provides otherwise, a trust is not a legal person. It is an accumulation of assets and liabilities which constitutes the trust estate, which is a separate entity.
However, the accumulation of rights and obligations comprising the trust estate does not have legal personality. These rights and obligations vest in, and must be administered by, the trustees. It is only through the trustees, specified as in the trust instrument, that the trust can act.
Who the trustees are, their number, how they are appointed, and under what circumstances they have power to bind the trust estate are matters defined in the trust deed, which is the trust’s constitutive charter.
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