Take care when ap­point­ing your trustees

Sunday Times - - Business Money -

● The ap­point­ment of trustees is not some­thing to be taken lightly. Of­ten, peo­ple choose close friends to be the trustees of their tes­ta­men­tary trust. This is prob­lem­atic, be­cause cir­cum­stances change, and friends em­i­grate and die un­ex­pect­edly. If you aren’t on top of your af­fairs, you might not have amended your will to re­flect your wishes.

An­gelique Visser, the vice-chair­woman of the Fidu­ciary In­sti­tute of South­ern Africa and a di­rec­tor at Baraza Wealth, says it’s cru­cial that you re­view your will an­nu­ally, when you re­view your fi­nan­cial plan. Check that you are still happy with your choice of guardian and trustees.

Visser ad­vo­cates in­clud­ing at least one pro­fes­sional trustee. “You need some­one who knows what the le­gal re­quire­ments are. It will also be very im­por­tant to en­sure that one se­lects a trustee who has the nec­es­sary ex­pe­ri­ence, pro­fes­sional in­dem­nity and is a mem­ber of a pro­fes­sional body that sets high eth­i­cal stan­dards as this per­son will be re­spon­si­ble for man­ag­ing the trust as­sets for the ben­e­fit of one’s loved ones.”

She is also in favour of a fam­ily mem­ber as a co-trustee. “But un­der­stand you are plac­ing a bur­den of re­spon­si­bil­ity on that per­son. You can’t ex­pect such a per­son to know trust law, even if they are a pro­fes­sional per­son in their own right. Pro­fes­sion­als are busy and don’t al­ways have the time to man­age a trust. And when some­thing goes wrong — when a cred­i­tor or ben­e­fi­ciary sues the trust — all the trustees are ex­posed.”

Ad­vo­cate Sankie Mo­rata, the chief op­er­a­tions of­fi­cer of San­lam Per­sonal Fi­nance: Fidu­ciary Ser­vices, says all trustees are jointly and sev­er­ally li­able for their ac­tions, but not all will ex­pect to be paid. “For ex­am­ple, if I was a trustee in my brother’s es­tate in my per­sonal ca­pac­ity, I wouldn’t charge be­cause it means my brother’s chil­dren would in­herit less.”

The du­ties of a trustee are wide but can be sum­marised as fol­lows, says Visser. A trustee must:

● Know and un­der­stand the trust deed;

● Act in the best in­ter­ests of the ben­e­fi­cia­ries;

● Act im­par­tially and in­de­pen­dently;

● Act with due care and ut­most dili­gence;

● Man­age the risks to the as­sets in the trust;

● Ad­min­is­ter, dis­pose of, in­vest and main­tain trust as­sets;

● Keep a proper record of trans­ac­tions, res­o­lu­tions and min­utes of trustee meet­ings;

● Pre­pare and sub­mit in­come-tax re­turns;

● Avoid con­flicts of in­ter­est;

● Ex­er­cise dis­cre­tion — this is part of con­trol­ling the as­sets and hav­ing the dis­cre­tion to take ac­tion;

● Main­tain a bank ac­count;

● Be ac­count­able; and

● Stay up to date with leg­isla­tive changes.

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