Accepting an appointment as trustee of a South African trust is not merely an administrative role. It carries significant legal obligations and, critically, the risk of serious personal liability. The Trust Property Control Act 57 of 1988 ("the Act") sets out the framework governing every trustee's conduct — and the courts have consistently held trustees to a high standard of care.
Whether you are the founder's spouse acting as family trustee, an accountant appointed in a professional capacity, or an independent trustee fulfilling a SARS compliance requirement, you are subject to the same legal obligations. This guide examines the duties, powers, and personal liability of trustees under South African law — and explains exactly where the lines are drawn between proper administration and a breach of trust that can result in personal financial consequences.
Who Can Be a Trustee?
Any adult of sound mind may be appointed as a trustee of a South African trust, whether an individual or a juristic person such as a company. However, appointment alone is not sufficient — a trustee may not act in their capacity as trustee until the Master of the High Court has issued Letters of Authority in terms of section 6 of the Act.
Eligibility Requirements
- Legal capacity: Must be a major (18 years or older) and of sound mind — minors and persons under curatorship may not serve as trustees
- Letters of Authority: Must obtain Letters of Authority from the Master before acting — section 12 of the Act provides that transactions entered into without Letters of Authority may be void
- Not disqualified: The Master may refuse to issue Letters of Authority to a person who has been convicted of fraud or dishonesty, or who is otherwise unsuitable
- Acceptance of office: A trustee must formally accept the office of trustee before the Master, typically by signing an acceptance form lodged with the trust registration
Critical: Never Act Before Letters of Authority Are Issued
Section 12 of the Trust Property Control Act is unequivocal: a person who acts as trustee without valid Letters of Authority may render every transaction they conclude on behalf of the trust void and unenforceable. This includes signing contracts, opening bank accounts, and selling or purchasing trust assets. Always ensure your Letters of Authority are current and in hand before taking any action on behalf of the trust.
The 7 Core Duties of a Trustee
The Trust Property Control Act, supplemented by the common law, imposes seven fundamental duties on every trustee. These duties are non-negotiable and cannot be contracted out of — even if the trust deed attempts to do so. Understanding each duty is essential to avoiding a finding of breach of trust and the personal liability that follows.
Duty of Loyalty
Section 9 — Act in interest of beneficiaries
A trustee must act exclusively in the interests of the beneficiaries of the trust, not in the trustee's own interests. This duty prohibits self-dealing — a trustee may not purchase trust assets for their own account, receive secret commissions, or use their position to benefit personally at the expense of the trust estate. Any transaction in which a trustee has a conflict of interest must be disclosed to all co-trustees and, where required by the trust deed, to the beneficiaries or an independent third party. Where genuine conflicts cannot be avoided, the affected trustee should recuse themselves from the relevant decision.
Duty of Care, Diligence and Skill
Section 9(1) — Care, diligence and skill of a prudent person
Section 9(1) of the Act requires every trustee to exercise the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another. This is an objective standard — it is not enough to plead ignorance or inexperience. A professional trustee (such as an attorney or accountant) is held to an even higher standard: the care, diligence and skill of a competent professional in that field. Courts have made it clear that passive participation in trust administration is itself a breach of duty — each trustee must actively and independently apply their mind to every decision.
Duty to Segregate Trust Property
Section 9(3) — Keep trust property separate from personal assets
Section 9(3) is one of the most frequently violated provisions of the Act, and one of the most consequential. A trustee must keep trust property strictly separate from their own property and from the property of any other person. In practice, this means: the trust must have its own dedicated bank account (never the founder's personal or business account); trust assets must be registered in the name of the trust (not the trustee personally); and trust income and expenses must be tracked separately from those of the trustee. Mixing trust and personal funds — even temporarily — is a serious breach that can expose the trustee to full personal liability for any loss suffered.
Duty to Keep Accounts and Records
Section 10 — Proper books of account and records
Under section 10 of the Act, every trustee is required to keep proper books of account and records of the trust's affairs. These records must be sufficient to enable the Master or any beneficiary to ascertain the true financial position of the trust at any time. Trustees must present accounts to beneficiaries on request, and in practice, annual financial statements (even if not audited) should be prepared as a minimum. Trustees who fail to maintain proper records are exposed to complaints to the Master and potential removal from office, in addition to personal liability for any undocumented transactions.
Duty to Invest Prudently
Common law — Prudent investor standard
Trustees must invest trust assets prudently, having regard to the objectives of the trust and the interests of all beneficiaries — including both income beneficiaries (who benefit from current returns) and capital beneficiaries (who benefit from capital growth and preservation). Speculative investments that expose the trust estate to unnecessary risk are a breach of this duty. Trustees should document their investment decisions and the reasons for them, and should consider obtaining appropriate financial advice when making significant investment decisions on behalf of the trust.
Duty to Distribute
Trust deed and common law — Distribute per trust deed
Trustees must distribute trust income and capital to beneficiaries in accordance with the provisions of the trust deed. Where the trust deed gives trustees discretion as to distribution, that discretion must be exercised honestly and for proper purposes — not arbitrarily and not to favour certain beneficiaries without justification. Trustees who retain income that should be distributed, or who make distributions to favoured beneficiaries at the expense of others, will be in breach of this duty. All distribution decisions should be documented in trustee resolutions.
Duty to Follow the Trust Deed
Section 9 — Act in terms of the trust instrument
A trustee's authority is defined and limited by the trust deed. A trustee cannot act outside the "four corners of the trust deed" — they may only do what the deed expressly authorises or what is reasonably necessary to give effect to that authorisation. Actions taken outside the scope of the trust deed may be void and unenforceable, and may expose the trustee to personal liability. Where trustees wish to take an action not clearly authorised by the deed, they should seek legal advice and, if necessary, approach a court for authorisation or apply to have the deed amended.
Trustee Powers
Trustees derive their powers from two sources: the trust deed, and the common law principle that trustees may do whatever is reasonably necessary and incidental to the administration of the trust. However, in practice, the trust deed is the primary source of trustee authority — and most modern trust deeds enumerate the trustees' powers in detail.
Common Trustee Powers in South African Trust Deeds
Power to Invest
To invest trust funds in approved investments, including equities, fixed deposits, unit trusts, and immovable property
Power to Buy and Sell
To acquire and dispose of trust assets, including immovable property, movable assets, and business interests
Power to Borrow and Lend
To borrow money on behalf of the trust and to lend trust funds to third parties or beneficiaries, subject to the deed
Power to Enter Contracts
To conclude commercial agreements, leases, and service contracts in furtherance of the trust's objects
Power to Litigate
To institute or defend legal proceedings on behalf of the trust, including appointing legal representatives
Power to Appoint Agents
To delegate specific administrative functions to professional agents such as property managers, accountants, or investment advisors
Power to Appoint Co-Trustees
To appoint additional trustees where authorised by the trust deed, subject to the Master's approval
Power to Distribute
To allocate and distribute trust income and capital to beneficiaries in the manner prescribed by the trust deed
Important: Where a trustee purports to exercise a power not expressly granted by the trust deed and not reasonably necessary for administration, that act may be void and the trustee personally liable for any resulting loss. When in doubt, seek legal advice before acting.
Personal Liability of Trustees
The consequences of a breach of trust can extend beyond the trust estate to the trustee's personal assets. South African courts have imposed personal liability on trustees in a range of circumstances, and the protections available to trustees are more limited than many people assume.
When Does Personal Liability Arise?
- Acting outside Letters of Authority: Any transaction concluded before Letters of Authority are issued, or in excess of the authority granted, can be void — leaving the trustee personally liable to third parties who suffered loss as a result
- Mixing trust and personal funds: Commingling trust assets with personal assets is a fundamental breach of the duty to segregate. Trustees who mix funds risk being held personally liable for all losses to the trust estate, whether or not they caused those losses directly
- Acting in breach of the trust deed: Trustees who take actions not authorised by the trust deed, or who fail to follow the prescribed decision-making process, are personally liable for any consequential loss to the trust estate or to beneficiaries
- Acting without proper authority (unanimous/majority): Where the trust deed requires unanimous or majority trustee consent, a trustee who acts unilaterally exposes themselves to personal liability for breach of trust
- Passive acquiescence in co-trustee breaches: A trustee who stands by and allows a co-trustee to commit a breach of trust without objecting or taking action to prevent the loss is equally liable as the co-trustee who committed the breach
Extent of Liability
- •Damages to the trust estate
- •Losses caused directly by the breach
- •Costs incurred without proper authority
- •Interest on amounts misapplied
- •Legal costs of proceedings against the trustee
Indemnity Clauses
Trust deeds commonly include indemnity clauses protecting trustees from personal liability for acts done in good faith. However, these indemnities have important limitations:
- ✓Protects good faith administrative errors
- ✓Covers reasonable professional judgement calls
- ✗Does NOT cover gross negligence
- ✗Does NOT cover fraud or dishonesty
- ✗Does NOT cover deliberate breaches of trust
SARS "Sham Trust" Risk
Where a founder exercises de facto control over the trust — making all decisions unilaterally, using trust assets as their own, and treating the trust as an alter ego — SARS may disregard the trust for tax purposes under the sham doctrine or the anti-avoidance provisions of section 7 of the Income Tax Act. In such cases, the trust's income and assets are attributed back to the founder personally. Independent trustee oversight and proper governance are essential to maintaining the trust's legitimate status.
The Independent Trustee
The requirement for an independent trustee in South African inter vivos trusts is driven primarily by SARS's anti-avoidance framework under section 7 of the Income Tax Act, and more broadly by the Master's requirements for proper trust governance. Without a genuinely independent trustee, SARS is likely to attribute the trust's income to the founder, negating the tax benefits the trust was established to achieve.
Who Qualifies as an Independent Trustee?
To be regarded as genuinely independent, a trustee must satisfy all of the following:
- Not related to the founder: Must not be a spouse, child, parent, sibling, or other close relative of the trust founder — direct or indirect family relationships disqualify the person from being truly independent
- Not a beneficiary: The independent trustee must not benefit from the trust in any capacity — neither as an income beneficiary nor as a capital beneficiary
- Not employed by the founder: A person employed by or economically dependent on the founder cannot be regarded as independent — their financial relationship compromises their ability to act impartially
- Genuine autonomy in decision-making: The independent trustee must exercise genuine independent judgment — not merely rubber-stamp the founder's decisions
The Independent Trustee's Role in Practice
In well-governed trusts, the independent trustee performs an active oversight function:
- Attending all trustee meetings and reviewing trust documents before signing resolutions
- Ensuring that trust decisions are in the genuine interests of the beneficiaries and not merely the founder's personal interests
- Maintaining their own copy of all trust records, resolutions, and financial statements
- Raising objections to proposed transactions that appear to breach the trust deed or conflict with the beneficiaries' interests
Important: An independent trustee bears the same legal liability as all other trustees. The fact that a trustee is independent does not reduce their exposure to personal liability for breach of trust. Independent trustees must be equally diligent in monitoring trust administration and preventing breaches by co-trustees.
Trustee Meetings & Resolutions
The way in which trustees make decisions is governed primarily by the trust deed, supplemented by the general principle that all trustees must apply their minds to every significant decision. Poor governance of meetings and resolutions is one of the most common administrative failings in South African trusts — and one of the most common grounds on which SARS challenges the validity of trust administration.
Decision-Making Requirements
- •Most trust deeds require unanimous consent for major decisions; check whether majority consent is permitted for routine matters
- •All trustees must be notified of and given reasonable opportunity to participate in every meeting
- •Round-robin resolutions (signed without a meeting) are permissible where the trust deed allows them
- •Virtual meetings via video conference are generally permissible, provided all trustees can participate meaningfully
Minutes & Record-Keeping
- •Minutes of every trustee meeting must be recorded and signed by all trustees present
- •Resolutions should record the nature of the decision, the reasons for it, and who was present
- •All signed resolutions and minutes must be retained in the trust's records indefinitely
- •SARS or the Master may request copies of minutes and resolutions — always ensure these are available and complete
What Makes a Valid Resolution?
A trustee resolution is the formal record of a trustee decision. To be valid, a resolution must: (a) be passed in accordance with the quorum and majority requirements of the trust deed; (b) be signed by all trustees who consented to the decision (or, where round-robin, by all trustees required under the deed); (c) clearly identify the decision taken and its legal and factual basis; and (d) be retained in the trust's records. A resolution that is not properly signed by all required trustees — or that was signed without the independent trustee genuinely applying their mind to the decision — may be challenged as invalid.
Removal of Trustees
A trustee may be removed from office in several ways, depending on the circumstances. Removal is a significant step that affects the legal administration of the trust and must be handled carefully to avoid disruption to the trust's affairs.
Removal by the Master (Section 20)
Section 20 of the Trust Property Control Act empowers the Master of the High Court to remove a trustee from office in specified circumstances, including: where the trustee is no longer capable of performing their duties; where the trustee has been convicted of fraud, theft, or dishonesty; where the trustee fails to comply with a lawful request by the Master; or where it is otherwise in the interest of the trust or its beneficiaries that the trustee be removed. An application for removal under section 20 may be brought by a co-trustee, a beneficiary, or the Master acting of their own accord.
Removal by a Court
A court of competent jurisdiction (typically the High Court) may remove a trustee on application by any interested party. Courts will generally order removal where there is a clear and material breach of trust, an irreconcilable conflict of interest, or a complete breakdown of the relationship between co-trustees that makes proper administration of the trust impossible. The courts apply a "best interests of the trust" test and will not remove a trustee simply because co-trustees or beneficiaries find the trustee's decisions inconvenient or disagreeable.
Voluntary Resignation
A trustee may resign from office by delivering a written notice of resignation to the Master and to their co-trustees. Resignation takes effect on acceptance by the Master. A resigning trustee remains liable for breaches committed during their tenure — resignation does not extinguish existing liability. The resigning trustee must cooperate in the transition, including handing over all trust documents, records, and assets in their possession to the continuing trustees.
Removal Under the Trust Deed
Many trust deeds include provisions allowing for the removal of trustees by a specified majority of co-trustees or beneficiaries, subject to the Master's consent. Where such a provision exists, the procedure set out in the deed must be followed precisely. Any removal that does not comply with the trust deed's requirements may be invalid, leaving the purportedly removed trustee still in office and still bearing the associated liabilities.
The Weight of the Office
Accepting the office of trustee means accepting a position of significant legal responsibility. The Trust Property Control Act and the common law impose demanding standards of conduct on every trustee — active engagement, independent judgment, proper record-keeping, and strict segregation of trust property from personal assets.
Trustees who discharge their duties properly protect themselves from personal liability and ensure that the trust achieves its objectives. Those who treat the role as a formality — signing documents without engaging, allowing the founder to run the trust unilaterally, or failing to maintain proper records — risk serious personal financial consequences. If you are a trustee, ensure you understand what is required of you. If you are establishing a trust, ensure that you appoint trustees who are willing and able to fulfil their responsibilities.
Questions About Trustee Duties or Liability?
Whether you are a newly appointed trustee, an independent trustee seeking guidance, or a beneficiary concerned about trust administration, MJ Kotze Inc can assist.