Independent trustee is best
In many international jurisdictions, the beneficiaries of a trust may not be trustees of the trust as well, but in SA it was always acceptable for the beneficiaries of a family trust to be appointed as trustees.
Landmark case in 2005
However, in the Land and Agricultural Bank of South Africa vs Parker case, the Supreme Court of Appeal ruled there was not proper separation of ownership or control of the trust assets from their enjoyment or use.
As the trustees are entrusted with the control of the assets in the interest of the beneficiaries, inadequate separation may result in the trust being regarded as an extension of the estate of the founder.
The court suggested the appointment of at least one independent outsider as trustee to every trust where all the beneficiaries are related to one another. This resulted in the Master of the High Court requiring all newly formed family business trusts to appoint at least one independent trustee.
Protection of assets
Fiduciary Institute of Southern Africa (Fisa) chair Dr Eben Nel said the purpose of a trust was to protect assets. But if the assets aren’t properly moved out of the estate of the founder/donor, and creditors or other parties can prove there’s not proper separation between the ownership of the assets and the enjoyment thereof (the trust is just the founder’s alter ego), the assets will form part of the founder’s estate (and won’t be protected).
Trustees of all discretionary family trusts and family business trusts should appoint at least one independent person to the board of trustees to protect the integrity of the trust, its beneficiaries and the other trustees, he added.
“An independent trustee is a person who cannot benefit from the income or assets of the trust and aren’t related to a beneficiary of the trust. Thus they can play a crucial role in the proper separation between ownership of the trust assets and the enjoyment thereof.”
Willing to say no
An independent trustee would be willing to speak up when other trustees want to take decisions not in the best interest of the trust and the beneficiaries. In other words, they would be “willing to say no”. Nel said: “The independent trustee fulfils a crucial role in the proper administration of the trust and should maintain their independence at all times, without allowing the other parties of the trust to unduly influence them. Ideally, the independent trustee should be a natural person or a corporate specialising in fiduciary law.” A. Mduduzi Luthuli of Luthuli Capital answers:
The response is a general view and doesn’t constitute advice.
You refer to a RA, but the fact that you get a monthly income based as a percentage of the in-