Time to review and optimise your Trusts

Stacy Rouchos

Trusts are established for various reasons, each with a carefully crafted Trust Deed, designed to meet specific objectives of the parties involved.

Notwithstanding the diligent efforts of founders and trustees, estate plans can inadvertently result in complications, thereby disadvantaging beneficiaries. Even the most well-structured Trust can become outdated due to changes in legislation, the evolving needs of family members, or due to unforeseen circumstances.

As a result, it is imperative to conduct periodic reviews of your Trust Deed to ensure that it continues to serve its intended purpose efficiently and remains a tax-effective component of your estate plan.

South African Trust law mandates that a Trust must be governed by its Trust Deed, provided it complies with the Trust Property Control Act and other applicable legislation. But what happens when provisions in your Deed are no longer relevant or are in conflict with new regulations?

If your Trust Deed was drafted by a qualified legal professional or an expert in Trust administration, it will contain provisions allowing for amendments to accommodate future changes. However, some Deeds, when originally drafted impose strict limitations, such as restricting the addition of new beneficiaries or setting specific criteria for appointing trustees. Typically, trustees and beneficiaries have the authority to make specific modifications under clearly defined circumstances, thereby allowing them to:

• Extend the Trust’s duration
• Rectify errors or ambiguities
• Replace trustees or redefine conditions for the distribution of Trust income or capital

Consolidating and streamlining Trusts
A well-structured Trust should facilitate seamless asset management, safeguard wealth, and minimise administrative burdens. Consolidating family Trusts is a strategic move that can:

• Enhance investment oversight
• Reduce administrative costs
• Minimise legal complexities
• Prevent the fragmentation of wealth across multiple accounts or structures

By consolidating assets within a Trust, families or other entities can more effectively preserve wealth, ensuring that all assets are properly accounted for and aligned with long-term succession plans.

The growing compliance burden
With regulatory requirements for Trusts becoming increasingly stringent, the annual costs of proper administration can sometimes outweigh the benefits. Recently South African authorities have implemented more rigorous oversight on trust governance, requiring even greater transparency and accountability from trustees. New compliance measures, including detailed record-keeping, mandatory disclosures, and stringent tax regulations, place a significant responsibility on trustees to ensure full compliance. Many older Trusts find themselves burdened by ongoing compliance obligations, including tax filings and Financial Intelligence Centre Act (FICA) submissions. In such cases, restructuring or dissolving a Trust may be the most prudent course of action, preventing unnecessary penalties for non-compliance with the South African Revenue Service (SARS).

It is also crucial to recognise that all Trusts are legally considered taxpayers, and trustees must file an annual income tax return—even for inactive Trusts. Under the Trust Property Control Act, trustees are required to manage Trust affairs with due care, diligence, and skill. Even when responsibilities are delegated to legal or tax professionals, the trustees are the ones who remain ultimately accountable. They can be held personally liable for any tax non-compliance, underscoring the importance of regular oversight and compliance reviews.

Trustees and beneficiaries should take a proactive approach by reviewing their Trust structures to ensure:

1. Full compliance with tax and regulatory requirements
2. Alignment with the latest legislative changes
3. Optimisation for financial efficiency and estate planning goals

Consulting with a professional Trust advisor is a prudent step to maximise the benefits of your Trust and explore restructuring opportunities if necessary. An expert can offer customised guidance, ensuring that your Trust remains current, valuable, and compliant as an integral part of your broader wealth strategy.