Take care when appointing your trustees
The appointment of trustees is not something to be taken lightly. Often, people choose close friends to be the trustees of their testamentary trust. This is problematic, because circumstances change, and friends emigrate and die unexpectedly. If you aren't on top of your affairs, you might not have amended your will to reflect your wishes.
Angelique Visser, the vice-chairwoman of the Fiduciary Institute of Southern Africa and a director at Baraza Wealth, says it's crucial that you review your will annually, when you review your financial plan. Check that you are still happy with your choice of guardian and trustees.
Visser advocates including at least one professional trustee. "You need someone who knows what the legal requirements are. It will also be very important to ensure that one selects a trustee who has the necessary experience, professional indemnity and is a member of a professional body that sets high ethical standards as this person will be responsible for managing the trust assets for the benefit of one's loved ones."
She is also in favour of a family member as a co-trustee. "But understand you are placing a burden of responsibility on that person. You can't expect such a person to know trust law, even if they are a professional person in their own right. Professionals are busy and don't always have the time to manage a trust. And when something goes wrong - when a creditor or beneficiary sues the trust - all the trustees are exposed."
Advocate Sankie Morata, the chief operations officer of Sanlam Personal Finance: Fiduciary Services, says all trustees are jointly and severally liable for their actions, but not all will expect to be paid. "For example, if I was a trustee in my brother's estate in my personal capacity, I wouldn't charge because it means my brother's children would inherit less."
The duties of a trustee are wide but can be summarised as follows, says Visser. A trustee must:
• Know and understand the trust deed;
• Act in the best interests of the beneficiaries;
• Act impartially and independently;
• Act with due care and utmost diligence;
• Manage the risks to the assets in the trust;
• Administer, dispose of, invest and maintain trust assets;
• Keep a proper record of transactions, resolutions and minutes of trustee meetings;
•Prepare and submit income-tax returns;
• Avoid conflicts of interest;
• Exercise discretion - this is part of controlling the assets and having the discretion to take action;
• Maintain a bank account;
• Be accountable; and
• Stay up to date with legislative changes.