An introduction to trusts in South Africa: A beneficial ownership perspective
Origins of trust law in South Africa
Trusts are legal instruments in which the rights to assets are transferred from the holder of the rights (the founder) to a trustee or trustees; trustees are responsible for the management of these assets for the benefit of an identified or identifiable beneficiary, as set out in a trust instrument. Trustees have no inherent right to benefit from the trust assets, but they exercise control over the assets in a way prescribed by the founder of the trust. [5]
Trust law in South Africa is rooted in Roman-Dutch law and has been developed through South African courts. Prior to the promulgation of the Trust Property Control Act of 1988 (TPCA), courts relied heavily on the common law principles pertaining to the law of contracts and structuring the regulation of trusts through court precedents. [6]
The TPCA sets out the basic regulations of what constitutes a valid trust and how trust property is to be dealt with. However, there are two main elements to trust instruments (the creation of a valid trust instrument and the actual administration of the trust) which are not comprehensively captured by the TPCA, and for which courts clarify disputes that arise. Subsequent to the promulgation of the TPCA, the courts have been approached to further develop the law on trusts. [7]
Endnotes
[5] Whilst “founder”, “settlor”, and “donor” are often used interchangeably, this briefing uses “founder”.
[6] Olivier et al., Trust Law and Practice.
[7] Legislative development of the TPCA through court precedents include rulings, amongst others, on: the duty and authority of the trustees; the management and identification of trust assets; founders’ control of trust assets; taxation and the acceptance of benefits by the beneficiaries. For more information, see: Olivier et al., Trust Law and Practice.