Although family trusts are used as the cornerstone of many estate planning and asset protection strategies, it is alarming to see the number of individuals and families, who do not understand the concept of trusts, who do not even know what their family trust deed says let alone asking themselves the question: "is my trust valid".
Condensed History of South African Trusts
The English concept of Trust found its way into South Africa in 1806 when South Africa became a British colony, because of a peace treaty Roman-Dutch Law was retained as the official legal system.
It is not clear when the concept of "a Trust" was first used in South Africa, however, the first reported judgment in which a trust was mentioned was in 1833 in Twentyman v Hewitt.
As more and more cases involving trusts were decided on, the conflict between the English concept of Equitable ownership and legal or dual ownership became problematic as there is no such thing as "a Trust" in Roman-Dutch Law.
The Supreme Court of Appeal has held in various cases that a Trust is a contract akin to a stipulatio alteri, namely a contract for the benefit of a third party. That means that contract law rules apply relating to the formation as well as amendment of the trust.
In 1987, Project 9 of the South African Law Commission's report was "Review of the Law of Trust", this report led to the promulgation of the Trust Property Control Act 57 of 1988.
The Trust Property Control Act defines two types of trusts, the first a discretionary trust, where the ownership of property is made over to another person (trustee) to be managed for the benefit of a person or class of persons (beneficiary) defined in the Trust instrument. The second, a vesting trust, where the ownership of property is made over to a beneficiary where the control over the property is placed under the control of another person (trustee).
In the next episode, we will be dealing with the elements necessary to create a valid trust.
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