EMILE MYBURGH: Courts fail women when it comes to husbands’ trusts

SA celebrates Women’s Day twice each year (the international one in March and a domestic one in August) and we would be justified in thinking women are considered full members of society.

Indeed, looking beyond our twice-yearly Women’s Day platitudes on Instagram there has been genuine progress under the constitution to provide dignity and equality to SA women. We have moved steadily away from a puritanical approach, though there is still much to be done to achieve true equality between the sexes.  

Recent case law has started giving more protection to all women. It is therefore reasonable to think that, at least as far as our courts are concerned, we are making progress and there is genuine concern for the wellbeing of women, who no matter the advances made in equality in the past decades are still at a huge disadvantage compared to men.

Women still frequently suffer discrimination, have to sign undertakings not to get pregnant in their first year of employment, earn less than men and take off considerable time at the expense of their earning capacity to devote to housekeeping and raising children. Seeing the courts giving women more rights is thus refreshing.

But while it seems we have reason to pat ourselves on the back, there is still one area where women are at distinct disadvantage; one that even carries the courts’ blessing; one they appear reluctant to interfere with: trusts. Trusts are an almost uniquely South African phenomenon, the preferred vehicle for the wealthy to guard their wealth against pesky creditors and from what some authors still call “disgruntled spouses”.

However, they are an opaque structure that isn’t even considered a legal person by the law but provides almost complete protection, since nothing that is housed in a trust is considered to be the property of the founder. They are created at the offices of the master of the high court with little oversight, and often called “The [insert any random surname here] Family Trust”.  

However, trusts are problematic from a women’s equality point of view as they are frequently used to deprive women of rights they would have had against their husbands' estates in the event of divorce or death. If a husband carefully structures his entire estate in a bona fide manner to put everything he owns in a trust, that in effect leaves him with a zero-net worth personal estate.

No matter whether he marries in or out of community of property, for the purposes of division of a joint matrimonial estate he will be a pauper, leaving his wife at divorce or at his death with nothing, and no recourse. This is with the blessing of the courts, which will only intervene if the trust was clearly set up with the purpose of defrauding the wife.

It doesn’t matter if before death or divorce the couple had a lavish lifestyle of fancy houses, luxury cars, private jets and the other trapping of ostentatious wealth; if it was housed in a trust it is untouchable. Unless the husband includes the wife as a trust beneficiary she will have no recourse and can find herself destitute when her husband trades her in for a younger and prettier new wife or dies and leaves her with nothing.   

No matter the progress made in providing more protection for women in marriages, and the noble provisions of the Maintenance of Surviving Spouses Act (whose provisions also protect unmarried spouses, thanks to recent case law), all can be circumvented by a husband who sets up a trust early in his life to host all of his assets.   

To the courts’ credit, they don’t allow husbands to skirt their responsibilities through sham trusts set up, for example, at the moment divorce proceedings are instituted, into which the husband hastily transfers his assets in an attempt to avoid his maintenance obligations. But the courts allow those trusts set up prudently early on in their lives, before a husband gets married, to be a safe haven from “disgruntled” wives and widows.   

It’s not as if courts are not aware of the consequences this structure can have on women. One judge noted in a recent decision: “I can certainly understand that in many instances great inequity may ensue when a person who has assisted in building up the assets of a trust is suddenly cut off from receiving benefits that she had previously received. However, a court cannot merely, on the basis of equity alone, go behind the veil of a trust.”

In other words, the honourable judge says, yes, I know life is now tough for you, but the court so respects a husband’s right to protect his assets that it would rather a widow descend into poverty than disturb this sacrosanct structure. Some judges even confirm this, with respect, misogynistic position, when they speak at family law conferences.   

Are our courts, the very institutions to whom the poor, the destitute and the widows turn in their hour of need, so insensitive to the plight the use of trusts can place women in? How can they in the same breath expand rights for married women, but deprive them any recourse when the assets are held in a trust? They are surely alive to the inequity this can cause women, so why do they claim they can do nothing about it?

How can the courts maintain, even defend, this situation in a constitutional democracy that affords women equality and dignity? There is no justification for not giving women who find themselves in genuine need relief in all cases where their husbands’ assets are held in a trust. This protection can easily be granted without removing the other benefits afforded to trusts for genuine estate planning purposes. 

If not, it would seem wise for women, when being proposed to and before saying “yes”, first to ask their suitors whether their assets are held in a trust, and if so to demand that they first be made trust beneficiaries. Of course, that might just spoil the romance of the moment. 

• Myburgh is an attorney practising in Johannesburg and São Paulo.