As discussed in our previous article, there might be many reasons why a trust deed needs to be amended. The amending of a trust deed is however not as simple and straight forward as one might think.

Trust deeds of this kind can be amended in various ways i.e. in terms of the rules of the Law of Contract or in terms of the derived powers as stipulated in the trust deed itself. A trust deed can also be amended by way of an application to court either in terms of the Common Law or in terms of section 13 of the Trust Property Control Act, 57 of 1988.

Where the founder is still alive a trust deed can be amended by means of the derived powers given to the trustees in terms of the deed itself or in terms of the Law of Contract whereby a later agreement between the founder and the trustees can amend or substitute an earlier agreement between the same parties. The trustees need not be the same persons as the original trustees but they (the trustees for the time being) owe a fiduciary duty to the actual and potential beneficiaries to always act in their interest.  This method ought to enjoy preference due to the legal certainty it brings along with it and should therefore be the default method to be used.

In light of a very recent decision by the Supreme Court of Appeal, it is necessary that where the beneficiaries have accepted the benefits they will have to be joined as a party to any amendment, be it in terms of the Law of Contract or in terms of the derived powers given in the trust deed itself, according to the general principle of the contract for the benefit of a third party and that any variation to that agreement should then be conducted only with their consent. Thus, if there was any previous amendment made to your trust deed, it is important to check whether the beneficiaries who have accepted benefits were made a party to the amendment for such amendment to be valid. Although there is no prescribed form of acceptance, it is suggested that an unequivocal expression of intention to accept is needed, as well as possibly also a communication of acceptance by the beneficiary to the trustees. In many trust deeds it is stated that a trustee accept the benefits on behalf of his minor children. The signing of the financial statements (in which income and/or capital is distributed) by a trustee who also qualifies as a beneficiary may also constitute acceptance as well as the fact that a beneficiary was made a party to the agreement to establish the trust or to amend the trust deed. Therefore, when considering a variation of the trust deed of an inter vivos trust, it is of paramount importance to establish first whether the beneficiaries have acquired any form of a right and whether they have accepted any benefits conferred upon them.

Where the founder is deceased, you are bound by the provisions of the trust deed. If the trust deed does not make provision for the amendment thereof after the death of the founder or if he were to become of unsound mind, the trust deed can only be amended by way of an application to court. When amending the trust deed after the death of the founder, one should proceed very carefully and must comply with the derived powers in the trust deed. This may stipulate that only the "administrative elements" may be amended and the class of beneficiaries may not be changed. Where the trust deed stipulates that it may be amended by agreement between the trustees and beneficiaries, one should look at the definition of beneficiaries very carefully. If the definition of income and/or capital beneficiaries include "those persons related by blood or affinity" the class of beneficiaries will also include the mother and father of a child, as well as the mother's and father's blood relations and thus can all brothers, sisters, aunts, uncles, cousins, nephews and nieces qualify as beneficiaries while relations by way of affinity can include all the "in-laws" such as uncles, aunts, brothers, sisters, cousins, nieces and nephews. Subsequently all these people will have to be made a party to the amendment of the trust deed whether they have received benefits or not.

Thus when amending your trust deed it is very important to consult with a specialist on the field of Trust Law in order to ensure that your trust deed is validly amended.