topic 2: trusts Flashcards
What is the definition of a trust according to Goodricke & Son (Pty) Ltd v Registrar of Deeds, Natal?
A trust exists when property is held by one person for the benefit of another or for a purpose other than their own benefit.
For a strict trust, two essential elements are the segregation of trust assets and an obligation to administer them for others.
What does the Trust Property Control Act 57 of 1988 define as ‘trust’?
An arrangement through which ownership in property is transferred to a trustee to be administered for the benefit of designated persons or for achieving a stated object.
It excludes cases where property is administered as executor, tutor, or curator.
What is a trust instrument?
A document that embodies the creation and provisions of a trust.
What are the types of trusts?
- Ownership trust
- Discretionary trust
- Vesting trust
- Business trust
- Unit trust
- Charitable trust
- Bewind trust
What is the purpose of a business trust?
To conduct a business with a profit motive for the benefit of beneficiaries.
How is a trust created?
- Contractually (inter vivos)
- Testamentary (mortis causa)
- Court order
- Contract for the benefit of a third party
Who are the parties involved in a trust?
- Founder
- Trustee
- Beneficiary
What is the role of the founder in a trust?
Initiates the trust creation, chooses the method, names beneficiaries, and determines the extent and nature of the trust.
Can a trustee also be a beneficiary?
Yes, but a trustee may not be the sole beneficiary.
What is the legal nature of a trust?
A trust is not a juristic person; it is an accumulation of assets and liabilities that constitutes a separate trust estate.
What are the requirements for forming a trust?
- Intention to form a trust
- Legal obligation by the founder
- Certain objective for the trust
- Duties accepted by the trustee
- Clearly defined trust assets
- Clearly defined beneficiaries
- Lawful object or purpose
What must be done with the trust instrument before a trustee can take control?
It must be lodged with the Master of the High Court.
Who can act as a trustee?
Any person with contractual capacity, unless the trust instrument imposes additional qualifications.
What are the common law duties of a trustee?
- Give effect to trust instrument provisions
- Act in good faith
- Avoid conflicts of interest
- Exercise care, diligence, and skill
What is the statutory duty of a trustee regarding the trust instrument?
Lodge the trust instrument with the Master.
What is the purpose of the powers of a trustee?
To preserve and protect trust assets.
What is the Turquand rule?
A third party contracting in good faith can assume that internal procedures have been complied with and enforce the contract.
What is estoppel in the context of trusts?
If trustees have misrepresented their authority and a third party has acted on that representation, the trustee may be held accountable.
What are the requirements for a third party to rely on estoppel?
- Impression created by the trustee
- Third party acts on that impression
- Fault on the side of the trustee
- Third party acts to their detriment
What is the remuneration of trustees according to Section 22?
Specified in the trust instrument or entitled to reasonable remuneration if not specified.
What protections do trustees have regarding liability?
Trustees are protected by limited liability, except in cases of negligence or breach of duty.
What can creditors do if a trustee distributes assets while having debts?
Creditors may bring an enrichment claim against beneficiaries.
What must be proven for a trustee’s conduct to be considered unlawful in terms of delict?
Conduct of the trustee is unlawful and caused patrimonial loss as a result of failing to act in a reasonable way.
What actions can creditors take against beneficiaries?
Creditors may bring an enrichment claim against beneficiaries and can take assets back from beneficiaries.
