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Partnerships & Trusts > Trusteeship > Flashcards

Trusteeship Flashcards

1
Q

What is a trusteeship?

A

A legal arrangement in which one or more individuals (trustees) are given the responsibility to manage and control assets or property for the benefit of another party (beneficiary or beneficiaries). This arrangement is usually governed by a trust deed or trust instrument, which sets out the terms of the trust, the powers and duties of the trustees, and the rights of the beneficiaries.

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2
Q

What are the key essentials of trusteeship?

A
  1. Appointed in a lawful manner
  2. Qualified to act as a trustee
  3. Accept the office of trusteeship
  4. Authorised by Master of the HC.
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3
Q

What are the common methods for appointing initial trustees?

A
  1. Appointment by request (oral trust)
  2. Appointment in the trust deed
  3. Appointment in the founder’s will (testamentary trust)
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4
Q

Can the founder include a succession plan for trusteeship?

A

Yes.

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5
Q

What is the purpose of a succession plan?

A

It ensures the continuity of the trust’s administration and helps avoid disputes or uncertainties in the future.

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6
Q

What is the power of assumption?

A

The authority granted to trustees (typically through the trust deed) to appoint additional trustees.

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7
Q

What are the key aspects of the power of assumption?

A
  1. Flexibility and continuity
  2. Built-in succession planning
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8
Q

What are the legal requirements for the power of assumption?

A
  1. When trustees exercise the power of assumption, they must generally notify the Master of the High Court, as the Trust Property Control Act requires that all trustees be formally appointed by the Master.
  2. Newly appointed trustees must take an oath of office, and they must be issued letters of authority by the Master to have the legal standing to act on behalf of the trust.
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9
Q

Can a testator delegate to executors the power to create a trust and appoint trustees?

A

No, it would breach the rule against delegation of testamentary power.

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10
Q

What is the rule against delegation of testamentary power?

A

The rule against delegation of testamentary power is a legal principle that prohibits a person who makes a will (the testator) from transferring or delegating their power to make testamentary decisions (i.e., decisions about the distribution of their estate after death) to another person.

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11
Q

What is the power of subrogation?

A

A mechanism by which the foudner of a trust can grant trustees the authority to resign from their roles while simultaneously appointing new trustees to take their place.

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12
Q

Can a founder grant beneficiaries the power to appoint trustees?

A

Yes

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13
Q

Can the founder appoint someone else to appoint/elect on their behalf?

A

Yes, Re Estate Grayson

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14
Q

What are some reasons a trustee office cannot be left vacant?

A
  1. Fulfilment of fiduciary duties
  2. Decision-making
  3. Legal obligations
  4. Risk of mismanagement
  5. Beneficiary needs
  6. Legal compliance
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15
Q

What if the office of the trustee cannot be filled or becomes vacant without any other mechanism for filling it?

A
  1. Master of the HC can appoint a trustee ito section 7 of TPCA.
  2. Any interested party can approach the Master ito section 7 TPCA or the HC
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16
Q

Can the Master create a trust where there was none before?

A

No, court does though.

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17
Q

What kind of trusts fall under the TPCA?

A

Trusts created by written agreement.

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18
Q

What is a de facto trustee?

A

A de facto trustee is a person who, without being formally appointed or authorized by the Master of the High Court, acts as a trustee and performs trustee-like functions in administering or managing trust assets

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19
Q

Does South African trust law recognise de facto trustees?

A

No.

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20
Q

What happens if the “de facto trustee” acted in good faith and incurred expenses related to the trust’s administration?

A

Negotiorum gestio.

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21
Q

What are the facts of Marais v Naude?

A
  1. Trust deed provided for a maximum of 4 trustees
  2. In a separate clause, the deed gave the trustees the right to appoint additional trustees
  3. Over a period of years. the trustees exercised that right, to increase the number of trustees to 9.
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22
Q

What is the holding in Marais v Naude?

A

The additional trustees were not lawfully appointed, and the right to appoint additional trustees only applied when one of the 4 trustee positions became vacant.

23
Q

What is the requirement of qualified to act?

A
  1. Trust deed may prescribe qualifications
  2. Minor may be a trustee, but requires consent of guardian
  3. Insolvent may be a trustee
  4. A non-citizen, non-resident, or a foreign company, may be a trustee of a SA trust
24
Q

What happens if a trustee becomes mentally incapacitated after appointment as a trustee?

A

Master of the HC has the authority under section 20(2)(d) of the TPCA to remove them from their trustee position.

25
Q

What are the restrictions per section 4A of the Wills Act?

A

Competency of persons involved in execution of will

26
Q

What does section 4A of the Wills Act hold?

A

Witnesses and spouse cannot act as trustees.

27
Q

What is the purpose of section 4A of the Wills Act?

A
  1. Prevent potential conflicts of interest and undue influence
  2. Maintain impartiality
  3. Ensure beneficiary protection
28
Q

What are the requirements of acceptance?

A
  1. Acceptance of office
    - Formal acceptance
    - Actively and knowingly consent to taking on the responsibilities and duties of a trustee
  2. Consent
    -explicit agreement to fiduciary duties and obligations associated with being trustee
29
Q

What is the case for consent?

A

Van Rensburg v Smith

30
Q

What is the requirement of authorization?

A

Master authorises trustee in writing to act as such ito section 6 of the TPCA.

31
Q

What is the procedure for authorisation by the Master?

A
  1. Trust deed is lodged with the Master
  2. Master examines the deed and makes enquiries
  3. Master decides whether to require the trustees to lodge security equivalent to value of trust fund
  4. Once security has been lodged, Master authorises trustee in writing to act.
32
Q

What if a trustee acts as such prior to authorisation by the Master?

A

Acts of trustee are null and void.

33
Q

Which cases deal with the acts of the trustee being null and void?

A
  1. Simplex v Van der Merwe
  2. Lupacchini v Minister of Safety and Security.
34
Q

What are the ways a trustee can lose office?

A
  1. Vacation of office
  2. Resignation from office
  3. Removal from office
35
Q

What are the ways in which vacation of office occurs?

A
  1. Death of the trustee
  2. Trustee appointed ex officio
  3. Revocation or amendment of appointment
  4. Vacation according to the terms of the trust
  5. Termination of the trust
36
Q

Which provision deals with resignation as trustee?

A

Section 21.

37
Q

What does section 21 hold?

A

Trustee can resign regardless of what trust deed says.

38
Q

What is the process of resignation as trustee?

A

Give notice to the Master and beneficiaries

39
Q

What happens if the trustee exercises right to resign arbitrarily or capriciously?

A

Beneficiaries would have an action against the resigning trustee for breach of trust.

40
Q

What are the ways in which removal from office occurs?

A
  1. By trust deed
  2. By court (s20(1))
  3. per section 20(2)
41
Q

Which case deals with removal by court?

A

Kidbrooke Place Management v Walton

42
Q

What does section 20(2) of the TPCA hold?

A

Master can remove trustee from office if:
1. Crime of dishonesty
2. Failure to provide security within 2 months of request
3. Sequestration
4. Declaration of mental illness or detention as president’s patient
5. Non-compliance with Act

43
Q

What is the remedy to remvoal by Master?

A

Court review bc it is an adminstrative act.

44
Q

What cases deal with removal from office?

A
  1. Gowar v Gowar
  2. Stander v Schwulst (breach of trust)
  3. Law Society of the Cape of Good Hope v Randell
45
Q

What are the typical grounds for removal by court?

A
  1. Breach of trust
  2. Insolvency
  3. Loss of mental capacity
  4. Conflict of interest
46
Q

What is the common law position on the trustee’s duty to give security?

A

It is the founder’s decision whether to require trustees to provide security, by putting the relevant terms in the trust deed.

47
Q

What does section 6 hold?

A

Master may require security from anyone appointed as a trustee and may refuse to authorise that person to act until they have provided security.

48
Q

What are the exemptions from furnishing security?

A
  1. Trust deed says so
  2. Master exempts
  3. Court exempts.
49
Q

What is the order of priority irt to exemptions?

A
  1. Master has priority over what the trust deed says
  2. Court has priority over the trust deed and Master
50
Q

When does the Master require security?

A

TPCA gives Master discretion.

51
Q

When will security not usually be demanded?

A
  1. If trust deed explicitly exempts the trustees from providing security
  2. Where the trustees and beneficiaries are closely related
  3. Where trustee is a legal practitioner
  4. Where value of the trust is low.
52
Q

What type of security is required?

A

Bank guarantee, mortgage, pledge

53
Q

What happens if there is a failure to give security?

A

Master will not authorise a trustee to act until security has been furnished.

54
Q

Who is liable for the costs of the security?

A

Trust fund unless deed forbids it.

Partnerships & Trusts (8 decks)

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