Amending Trust Deeds

by Annemarie Schutte


Trust Deed

As you know by now, we are all about answering your questions and today is no different. We will, however, only look at one question frequently asked by prospective new clients.

This two-fold question is:

“Can I amend my current Trust Deed; and who needs to agree to the proposed amendment?”

Your Trust Advisor will first do a Trust review to determine if the Trust is a valid Trust. An invalid Trust cannot be validated by an amendment. If your Advisor gives you the go ahead to proceed with the amendment, the current Trustees and accounting officer needs to confirm what assets are owned by the Trust, and if any beneficiary has ever received any benefit from the Trust.

In the matter Ferreira and Another v Van der Merwe, one of the matters the Court had to decide on was if the amendment to the Trust Deed was valid.

The JVDM Trust initially had only one Trustee, and the four children were the beneficiaries. The Founder passed away, and since the Trustee and two of the children were no longer seeing eye to eye, the Trustee wanted to remove them as beneficiaries from the Trust. These two children did previously receive benefits from the Trust.

After the Trustee was unsuccessful in getting the two children to sign a waiver to their rights in the Trust, he filed an amendment to the Trust Deed, replacing the original Trust Deed in which the two children were no longer beneficiaries to the Trust. Thereafter, three more Trustees were appointed in terms of this amended Trust Deed. 

It is important to note the original Trust Deed did not make provision for amendments and it was determined that the Founder initially created the Trust for the four children to each get 25% of the capital assets.

The two children brought an application to set aside the amendment made to the Trust Deed and also requested the Court to declare the appointment of the Trustees to be null and void.

The Court ruled that the amendment was in fact invalid and the Judge held two reasons for this ruling:

  1. The original Trust Deed did not make provision for such an amendment; and
  2. Since the two children accepted benefits from the Trust, they had to consent to the amendments to the Trust Deed, which they didn't.

In light of the above, the Court further found the appointment of the three new Trustees to be void, since they were appointed in terms of an invalid amendment. Here, the Court referred to the Erwee matter in which the Court ruled that Trustees are appointed in accordance with the Trust Deed.

It is clear from the above matter how important it is to allow your Trust Advisor to first do a proper review of the Trust Deed and to provide him/her with accurate information regarding benefits received and accepted by beneficiaries of the Trust to ensure the amendment is valid, and consequently all actions flowing from the amendment. Generally, the Founder and Trustees, together with the beneficiaries who received a benefit, will have to consent to proposed amendments. If the Founder is no longer alive, the Trust Deed may still be amended by the Trustees and the beneficiaries who received a benefit.

Remember, the Trust is set up for the benefit of the beneficiaries, and therefore their rights must at all times be protected.

If you have questions regarding your trust structure, please do not hesitate to contact your trust advisor. If you'd like to get in touch with a trust advisor, please contact services@wealthmastersclub.com.




 
      Dhrystone
Top