25 Mar

Trusts generally have a wide application and can be customised to meet specific needs.

  • Reasons to establish a trust include:
    • Providing for minor beneficiaries financially and otherwise
    • Honoring maintenance commitments in divorce orders and settlements
    • Providing for disabled dependents or aged parents
    • Protecting and preserving assets for the next generation
    • Serving as a holding vehicle for assets as part of estate planning structuring
    • Providing a regular income for favorite charities (public benefit organizations)
    • Providing for the dependents of a deceased employee

  • A trust is a legal relationship where assets are placed under control of another person for the benefit of a third party.
  • Trusts can be testamentary (created in a last will and testament) or inter vivos (established during the lifetime of the founder).
  • The administration of a trust involves managing assets and investments, managing relationships between beneficiaries and trustees, and complying with relevant legislation.
  • Important principles for trust administration include giving effect to the trust instrument, exercising discretion independently, observing utmost faith, using greater care in trust property, and avoiding conflicts of interest.
  • Trustee duties include keeping a balance between present and future beneficiaries, treating all beneficiaries impartially, establishing a balance between income production and capital protection, ensuring trust property retains its value, investing surplus funds, reviewing the trust regularly, submitting statutory returns, recording important decisions in writing, honoring the wishes of the testator or founder, and entertaining requests for assistance from beneficiaries.
  • Trustees have a fiduciary responsibility, which is onerous and requires them to act in the best interests of the beneficiaries.
    Trustees must keep a balance between the interests of present and future beneficiaries, treating all beneficiaries impartially and avoiding conflicts of interest.
  • Trustees must ensure that trust property is managed and invested properly, and that it retains its value or appreciates where possible.
  • Trustees must switch speculative investments to safer ones and invest surplus funds in a timely manner.
  • Trustees must keep trust property in a proper state of repair and ensure that co-trustees act prudently.
  • Trustees must review the trust regularly and submit statutory returns, such as tax returns, on time.
  • Trustees must record important decisions in writing and honor the wishes of the testator or founder.
  • Trustees must entertain requests for assistance from beneficiaries and provide support when necessary.
  • In summary, trusts can be a valuable tool for providing for beneficiaries, protecting and preserving assets, and serving charitable purposes. However, the administration of a trust requires careful attention to legal requirements and the interests of the beneficiaries, making it essential to work with experienced professionals to ensure that the trust is managed properly.

Author: Louwrens Koen 

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