Master’s hand is in your trust

INDEPENDENT NOMINEES: CAN APPOINT AND EVEN DETERMINE PAY Following on from Thursday’s Personal Finance article on changes regarding independent trustees, we look at their appointment.

The Chief Master has announced new changes to the administration of trusts to be administered by the various Masters’ offices, mostly relating to the appointment of independent trustees. The Master must now appoint an independent trustee where the trust is registered for the first time and the trust is a so-called “family business trust”. The reference to “business” may be misleading, as there is no requirement of trading in the trust for it to be recognised as a business trust.

Should the trust instrument not make provision for the appointment of an independent trustee, and the Master deems it necessary to appoint such trustee in terms of section 7(2) of the Trust Property Control Act, the following persons must be consulted to obtain nominations for an independent trustee: 1. The founder; 2. The existing trustees; and 3. Beneficiaries with a vested right

The Master is not bound by the nomination and may appoint a suitable person other than those nominated. Masters are advised in the governing directive to do so only in exceptional circumstances.

If the independent trustee was appointed in the trust deed and the trust deed makes provision for the replacement of such trustee, the provisions in the trust deed for such replacement should prevail, and the Master should authorise such replacement trustee.

Where the independent trustee resigns after being appointed by the Master, he may replace the independent trustee. The replacement trustee should be identified in the same manner in which the independent trustee was first identified.

An independent trustee is entitled to a fee as any other trustee in that trust. If the trust deed contains a prescription regarding fees, the trustee is entitled to that fee. If the trust deed does not specify the fee to which the trustee is entitled, and the parties cannot agree on a fee, the Master will have to use section 22 of the Trust Property Control Act, 1988 to determine a reasonable fee. In Griese v Bonkkorp Trust Bpk 1990 (2) SA 328 (0) the court provided guidance to the Master when determining the trustee’s fee.

Given the direction in which trust administration and the focus on trusts in SA are heading, it is advisable therefore for the settler to consider appointing independent trustees from the start, a step which will seem to avoid an interference by the Master in the administration of the trust.

Johan Troskie is an international tax lawyer and Master Tax Practitioner at JMT & Associates