South African Trust Law

Transcription

1 South African Trust Law Principles and Practice Second Edition François du Toit BA LLB LLM LLD (Stell) Associate Professor in Private Law University ofthe Western Cape LexisNexis DURBAN

2 Contents Préface v Chapter 1 General Introduction 1 1 Introduction The définition of a trust Trusts in a wide and a narrow sensé The statutory définition of a trust The parties to a trust The founder Thetrustee The beneficiary Trust property Trust instruments Written agreement Wili Court order Other sources of trusts Essential features of South African trust law 9 Chapter 2 The Origins of the Trust, and its Réception and Development in South African Law 2 1 Introduction The history of the trust The Germanie Treuhand The English trust The réception of the trust in South African law The trust introduced to South Africa Is the South African trust a true trust? The légal nature of the trust in South African law The testamentary trust The trust inter vivos The trust created by court order The development of the trust by the South African courts and législature Development by the courts Development by the législature The trust as a légal person? 22 Chapter 3 The Création of a Trust 3 1 Introduction The requirements for the création of a valid trust 27 Vil

3 viii South African Trust Law. Principles and Practice An intention to create a trust Expression of intention in a mode apt to create an obligation A définition with reasonable certainty of the trust property A définition with reasonable certainty of the trust object Lawfulness of the trust object Absence of control by the founder Functional séparation between a trustee's control over trust property and the benefit derived from such control Requirements for the commencement of trust administration A trustée The transfer of trust property to a trustée or trust beneficiary The moment at which a trust comes into being The testamentary trust The trust inter vivos Is the création of a trust a unilatéral or multilatéral act? The testamentary trust The trust inter vivos The name of a trust 39 Chapter 4 The Amendment of Trust Provisions and the Termination of a Trust 4 1 Introduction The amendment of trust provisions at common law The amendment of the testamentary trust The High Court's common-law power of amendment Amendment ob causam necessariam Amendment of testamentary trust provisions that are illégal, contra bonos mores or contrary to public policy Amendment in terms of the cyprès doctrine Amendment by consensual arrangement between trust beneficiaries - the family agreement Amendment by the trustée The amendment of the trust intervivos The High Court's common-law power of amendment Amendment ob causam necessariam Amendment in respect of contractual provisions that are illégal, contra bonos mores or contrary to public policy Amendment in terms of the cy près doctrine Amendment by consensual arrangement between trust beneficiaries - the family agreement Unilatéral amendment by the founder Amendment by agreement between the founder and trustée Amendment by agreement between the founder, trustée and trust beneficiaries Amendment by the trustée The amendment of trust provisions by the High Court in terms of statute Section 13 of the Trust Property Control Act Sections 2 and 3 of the Immovable Property (Removal or Modification of Restrictions) Act The termination of a trust 57

4 Contents ix Chapter 5 The Légal Position of the Trust Founder 5 1 Introduction Who can be a trust founder? Transfer of ownership in property by the trust founder Relinquishment of control by the founder 61 Chapter 6 The Légal Position of the Trustée 6 1 Introduction Compétence to act as trustée The appointment and authorisation of trustées Terminology Who can appoint trustées? The trust founder The trustées The trust beneficiaries The Master The High Court Other parties Statute Appointment of a foreign trustée The number of trustées that may be appointed Acceptance by a trustée Authorisation to act as trustée Authorisation of a trustée that is a corporation The validity of an act performed by an unauthorised trustée Furnishing of security by a trustée The fiduciary position of a trustée The office of trustée The fiduciary duty of a trustée 8) 6 5 The duties of a trustée Acquisition and lodgement of the trust instrument Payment of Master's fées Notice of address Obtainment of control over trust property Administration of the trust Conservation of trust property Rendering trust property productive Investment of trust funds Séparation of trust property from private property Opening a trust account Duty of care Impartiality Duty to keep accounting books Accountability Distribution of trust income and capital Custody of documents Failure by a trustée to account or to perform duties The powers of a trustée 95

5 x South African Trust Law: Principles and Practice The source, nature and extent of a trustee's powers Délégation of powers The relationship between co-trustees Expenses and rémunération of a trustée Expenses and indemnification Rémunération Légal proceedings by or against a trustée Citation Costs Personal liability of a trustée Breach of trust Delictual liability Liability of co-trustees Exemption from liability for breach of trust Other instances of personal liability Criminal liability Insolvency of a trust or trustée Insolvency of a trust Insolvency of a trustée Loss of office by a trustée Dissolution of a trust Vacation of office in accordance with the terms of the trust instrument Death of a trustée Résignation Removal by the Master Removal by the High Court 111 Chapter 7 The Légal Position of the Trust Beneficiary 7 1 Introduction Who can be a trust beneficiary? Appointment of, and acceptance or répudiation by, a beneficiary Appointment Acceptance Adiation under a testamentary trust Acceptance under an inter vivos trust Répudiation and renunciation The nature and extent of a trust beneficiary's rights A personal right against the trustée for the proper administration of the trust A trust beneficiary's rights with regard to trust income and/or capital Vested rights as opposed to contingent rights The right to trust income The right to trust capital Capital beneficiaries under a bewind trust Capital beneficiaries under an ownership trust Accélération of benefits Accrual of income and/or capital benefits 133

6 Contents xi 7 5 Remédies of a trust beneficiary Remédies against the trustée Action to enforce trust provisions Administrative and statutory remédies Aquilian action for breach of trust Interdict against aliénation of trust property Action for unjustified enrichment Remédies against third parties Aquilian action Remédies against third-party acquirers of trust property Litigation on behalf of a trust Successive beneficiaries and long-term dispositions under a trust 141 Chapter 8 Trusts and Taxation 8 1 Introduction Income tax Descriptions and définitions The taxability of trust income in the hands of the parties to a trust Section 25B of the Income Tax Act Section 7 of the Income Tax Act Section 7(1) Section 7(2), 7(2A), 7(2B) and 7(2C) Section 7(3) and 7(4) Section 7(5) Section 7(6) Section 7(7) Section 7(8) Summary Recovery of tax Section 103 of the Income Tax Act Exemption in respect of public benefit trusts Donations tax Descriptions and définitions Disposai of property to the trustée of an inter vivos trust Exemptions from donations tax Payment of donations tax The termination of a trust and répudiation by trust beneficiaries Estate duty Descriptions and définitions "Property" for the purpose of the Estate Duty Act "Property deemed to be property" for the purpose of the Estate Duty Act Déductions from the gross estate Payment of estate duty Estate duty liability of the parties to a trust The founder The trustée The trust beneficiary 1 5Q 8 5 Transfer duty Descriptions and définitions Exemptions from transfer duty Payment of transfer duty 162

7 xii South African Trust Law: Principles and Practke 8 6 Capital gains tax The introduction of capital gains tax Some key issues with regard to capital gains tax Capital gains and capital losses "Asset" for the purpose of capital gains tax "Disposai" for the purpose of capital gains tax Disposais to and from a deceased estate Some exemptions to and exclusions from capital gains tax that pertain to trusts The transfer of assets between spouses Spécifie anti-avoidance measures Provisions that relate specifically to trusts and trust beneficiaries Does taxation législation negate the trust's rôle as a viable estate planning tool?. 167 Chapter 9 The Trust in Légal and Commercial Practice 9 1 Introduction The testamentary ownership trust Why a testamentary ownership trust and not a usufruct or fideicommissuml Particular applications of the testamentary ownership trust Simultaneous death Survivoras sole heir Beneficiaries with limited capacity Long-term dispositions Holding non-subdivisible property The inter vivos ownership trust Why an inter vivos ownership trust? Practical applications of the inter vivos ownership trust To receive bequests For minors or persons incapable of looking after their own affairs Holding non-subdivisible property As the owner of a building or business premises As a safeguard against insolvency and personal debt To receive damages paid to minors To facilitate divorce settlements Other applications 179 "? 4 The bewind trust The bewind trust in practice The discretionary trust The discretionary trust in practice The business trust The nature of the business trust The business trust in practice Particular problem areas with regard to the business trust The application of the Turquand rule to business trusts An identity of interests between trustées and trust beneficiaries

8 Contents xiii 9 7 The charitable trust Leniency afforded charitable trusts Miscellaneous practical trust matters Trusts and land registration practice Purchasing immovable property for a trust yet to be formed The saleof a trust 195 Appendix Trust Property Control Act 57 of Bibliography 207 Législation Register 213 Table of Cases 227 Index 235