In South Africa, trusts are essential wealth planning tools and trustees play a central role in the administration and protection of trusts. As such, the law imposes strict fiduciary and administrative obligations on trustees – with a failure to comply potentially exposing trustees to personal liability and removal from office. This article explains the key duties of a trustee in South Africa and delineates the legal standards trustees are expected to meet.
Legal framework
Under South African law, the legal duties of trustees are primarily governed by the Trust Property Control Act and the common law, i.e. judge-made law. Failure to comply with these obligations can result in personal liability, removal as a trustee, or legal action by beneficiaries or the Master of the High Court.
What is a trustee?
A trustee is a person appointed to administer and manage trust property for the benefit of the trust’s beneficiaries and in accordance with the trust deed. Correspondingly, trustees hold and administer trust assets in their official capacities for the benefit of beneficiaries. Because trustees manage the affairs of others, the law imposes strict obligations on them to act independently, honestly, and in the best interests of the beneficiaries and the trust.
Duties of trustees under the Trust Property Control Act
Duty to act with care, skill, and diligence
Section 9(1) of the Trust Property Control Act (‘the Act’) requires trustees to act with the care, diligence, and skill reasonably expected of a person who manages the affairs of another. This statutory duty forms the foundation of a trustee’s fiduciary obligations in South Africa. Trustees must actively participate in trust administration and may not simply leave decision-making to co-trustees or third parties.
To that end, trustees are expected to:
- Properly understand the trust deed;
- Make informed decisions;
- Protect trust assets; and
- Ensure the trust is administered lawfully and effectively.
This is one of the most important legal duties imposed on trustees.
Duty to obtain written authority
Section 6(1) of the Act provides that a trustee may only act in that capacity once authorised in writing by the Master of the High Court, which is issued in the form of Letters of Authority. Crucially, without written authority, trustees lack the legal capacity to bind the trust, and actions taken on behalf of the trust may be unenforceable or invalid. Trustees must therefore ensure that they are properly authorised before signing agreements, opening accounts, or dealing with trust assets.
Duty to register and identify trust property
Section 11 of the Act requires trustees to ensure that trust property is clearly identified in records and bookkeeping as property held in a trustee capacity. As such, proper record-keeping is essential for transparency, accountability, and compliance with the law.
Duty to open and maintain a separate trust bank account
Section 10 of the Act requires trustees to keep trust property separate from their personal property and to esnure that it is clearly identifiable as trust property. In practice, this includes maintaining separate trust banking arrangements and financial records. Indeed, mixing personal and trust finances can expose trustees to allegations of misconduct and may result in a court finding that the trust was not properly administered or that the trust form was abused as a vehicle to conceal wealth.
Duty to furnish an address to the Master
Section 5 of the Act requires trustees to furnish the Master of the High Court with an address for service and to notify the Master of any change of address within 14 days. Additionally, if the address changes, the Master must be notified within 14 days of the change.
Duty to protect trust documents
Section 17 of the Act provides that trustees may not destroy documents relating to the investment, control, administration, alienation, or distribution of trust property within five years from the termination of the trust, unless the Master gives written consent. These documents include:
- The trust deed;
- Financial records;
- Resolutions;
- Contracts; and
- Supporting administrative documents.
Importantly, trust records may not be destroyed prematurely and must be retained in accordance with legal requirements.
Duty to follow the trust deed
Critically, trustees must always act within the powers granted by the trust deed. The trust instrument may impose additional obligations beyond those contained in legislation. Indicating the seriousness of non-compliance, trustees who act outside the scope of the trust deed may be held personally liable for losses suffered by the trust or beneficiaries.
Duty to account to the Master
Section 16 of the Act empowers the Master of the High Court to call upon trustees to account for the administration and disposal of trust property and to provide any books, records, or documents relating to the trust.
In this regard, failure to cooperate with the Master may result in removal from office.
Fiduciary duties of trustees under the common law
In addition to statutory obligations, trustees owe fiduciary duties to the trust and its beneficiaries under South African law. Simply put, a fiduciary duty means that trustees must place the interests of the trust above their own personal interests. Accordingly, trustees may not use trust property for personal gain or place themselves in positions where conflicts of interest arise.
Under the common law, trustees’ key fiduciary duties include:
- Acting independently;
- Avoiding conflicts of interest;
- Acting honestly and in good faith;
- Exercising impartiality between beneficiaries; and
- Protecting trust assets.
Ultimately, trustees are expected to act transparently and remain accountable for all decisions taken on behalf of the trust.
Can a trustee be removed?
Section 20 of the Act empowers a court, and in certain circumstances, the Master of the High Court, to remove a trustee from office if they fail to perform their duties properly, or where removal would be in the interests of the trust and its beneficiaries.
Common grounds for removal include:
- Failure to act independently;
- Mismanagement of trust assets;
- Failure to keep records;
- Conflicts of interest;
- Dishonesty or misconduct; and
- Failure to comply with the requirements of the Act or trust deed.
In serious cases, trustees may also face personal liability for losses caused to the trust.
Additional compliance duties affecting trustees in South Africa
A more recent legal development, trustees in South Africa are now also subject to enhanced compliance obligations introduced through amendments linked to anti-money laundering and beneficial ownership transparency reforms.
The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act established additional compliance duties under the Trust Property Control Act, including the insertion of section 11A, which remains in effect. These additional duties imposed on trustees were implemented as part of South Africa’s response to international anti-money laundering standards and FATF greylisting concerns prior to the country’s removal from the grey list.
Section 11A of the Act, read together with Regulations 3B, 3C, 3D, and 3E of the Regulations under the same legislation, now requires trustees to:
- Establish accurate beneficial ownership records;
- Identify the natural persons who ultimately own, control, or benefit from the trust;
- Lodge prescribed beneficial ownership information with the Master of the High Court;
- Keep beneficial ownership information updated;
- Retain supporting identification and compliance records; and
- Disclose relevant information to regulatory authorities, including SARS, where legally required.
Notably, these duties apply in addition to the ordinary fiduciary and administrative obligations imposed on trustees.
To further facilitate compliance, the amendments also introduced a definition of ‘accountable institution’ under section 1 of the Trust Property Control Act by reference to the Financial Intelligence Centre Act. Trustees are frequently required to provide beneficial ownership and verification information to accountable institutions, such as banks, attorneys, auditors, estate agents, and financial service providers. In practice, this has resulted in increased regulatory scrutiny relating to trust ownership structures and compliance documentation.
Why trustee compliance matters
South African courts increasingly scrutinise the administration of trusts, particularly where these vehicles are used for estate planning or asset protection purposes. As such, trustees who fail to administer trusts correctly risk having the trust structure challenged. Proper administration is therefore essential not only for legal compliance, but also for preserving the integrity and efficacy of the trust itself.
Final thoughts
Being a trustee involves far more than holding a title. Trustees carry significant legal and fiduciary responsibilities and are expected to administer trusts with professionalism, diligence, and honesty. For this reason, anyone acting as a trustee should fully understand both the Trust Property Control Act, their common law duties, and the provisions of the trust deed to ensure ongoing compliance and effective administration.
For further information or expert legal assistance with any trust-related matter, reach out to our team today.
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