Training trustees for tomorrow: Why is trustee training essential to preserving family wealth?

Carien Strauss, Sanlam Private Wealth.

Without the appropriate preparation and training, your heirs might struggle to manage their legacy/inheritance and hold onto the family wealth for future generations. Providing financial education to your family heirs at an early stage is crucial. This can be achieved by including heirs as trustees on the family trust or inviting them to trustee meetings. It is, however, essential to complement a trustee appointment with appropriate trustee training, preferably provided by professionals. Such training will allow them to grow into their trustee role while you are still there to provide guidance against the backdrop of your family’s personal style and flair.

Why is trustee training essential?

Many trustees are blissfully unaware of the responsibility and duties that a trustee role requires. The Trust Property Control Act 57 of 1988 (‘the Act’) requires a trustee to act with the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another. The Act further states that any provision contained in the trust deed shall be void in so far as it indemnifies the trustee against the liability for breach of trust where he/she fails to show the degree of care, diligence and skill required. 

What should trustee training entail? 

Making trustees aware of their duties – These duties typically entail taking control of and protecting trust assets, the opening of a separate bank account for the trust, registering the trust for tax and seeing to the required tax filings, ensuring that proper books of account are kept, keeping record of trustee decisions and evaluating whether proposed trust transactions are to the benefit of the beneficiaries. 

Educating trustees on the relevant legislation applicable to trusts – This entails keeping trustees abreast of recent court cases establishing new legal principles, and which are often adopted by the Master of the High Court. Trust taxes are also increasingly complex given the constant changes to the applicable tax legislations. 

Educating trustees on how to read and interpret the trust deed – Trustees are expected to have detailed knowledge of the trust deed and are required to give effect thereto. 

Making trustees aware of typical potholes to look out for – The failure of many trustees in their duties result from common errors such as neglecting to open a separate bank account for the trust, the absence of a proper consultation process between trustees when decisions regarding trust assets are made and not keeping the trust administration up to date. 

Heirs will be more inclined to familiarise themselves with the family’s financial affairs if they are given the opportunity to become actively involved. As the adage goes: ‘Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime’.