Wills & Property: 5 common mistakes Trustees make in South Africa
Despite the importance of estate planning, too few South Africans have a valid will, leaving their families vulnerable to prolonged legal battles, unexpected taxes, and emotional disputes. With September being Wills Month, it's an ideal time to learn about wills, trusts, and the key role trustees play in protecting your legacy.
Trustees must manage assets and property as directed by the deceased. Despite good intentions, many make avoidable errors that can disrupt the process and hurt beneficiaries.
Here are five common missteps trustees make in South Africa:
- Choosing the wrong trustee
Appointing a trustee is a strategic decision. Many choose friends or family without considering their time, financial skills, or impartiality. According to Gerard Abrahamse, General Manager at ASI Property Poor trustee selection is a leading cause of mismanagement. That's why choosing someone responsible, financially literate, and impartial is essential. For complex estates, a professional trustee with legal or financial expertise may be needed.
- Failing to transfer property into the trust
Setting up a trust is just the beginning. Assets like homes and bank accounts must be formally transferred; otherwise, they remain in the founder’s name and risk taxes or delays. Families can encounter delays and costs if property titles aren’t updated to reflect trust ownership. Ensure all assets are legally registered in the trust’s name to avoid such issues. Property specialists can provide guidance throughout this process.
- Founder retaining too much control
Founders often keep managing trust assets as if they own them. This can backfire, as courts may declare the trust invalid if the founder hasn’t relinquished control. South African law requires trustees to act independently and impartially. Mixing personal and trust assets can bring serious legal trouble. Keep trust assets separate and let trustees manage without interference to maintain legitimacy.
- Ignoring tax responsibilities
Trusts in South Africa have specific tax obligations. Many trustees are unaware that they are required to file tax returns for the trust or misunderstand how trust income is taxed.
SARS taxes trusts at a flat rate of 45% on income retained within the trust, making tax planning essential. Consulting a qualified tax professional ensures the trust remains compliant and financially efficient, helping to avoid penalties and unnecessary costs.
- Trustees acting alone
Trustees must act jointly. When one trustee makes decisions without consulting the others, it can lead to disputes, invalid decisions, and even legal challenges.
Lack of communication among trustees can jeopardise the trust’s integrity. Regular meetings, documented decisions, and open dialogue are essential to maintaining trust and ensuring compliance with legal requirements.
Without wills, families face chaos after a loved one’s death. Proper planning—including a valid will, a well-structured trust, and competent trustees is crucial for protecting your assets and ensuring the future well-being of your loved ones.
Partnering with experts like ASI Property can simplify the process and ensure your estate is managed with care and professionalism.
Take this Wills Month to review your will and trust arrangements. Stay informed and work with the right professionals to avoid common trustee mistakes. Your loved ones will benefit.
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