The perception which exists that once your family trust has been registered with the Master of the High Court it is valid, is wrong! Even though the Master is considered being the 'watch dog' over trusts, it is not the Master’s duty to check the validity of the trust deed upon the “registration” of the trust or the validity of subsequent amendments to the deed. The validity is usually only challenged when the trust enters into a dispute with, for example, a party contracting with the trust. Furthermore, due to the fact that a trust is considered to be "a creature of document", a trust can only be as good as the document in which it is founded, allows it to be. From the legal audits done on trust deeds at our firm, an alarming 85% plus of trust deeds from all over South Africa may not stand the test of validity. In more than 60% of trusts, the parties to the trust could have been structured better. It may be worth the while to do a DIY basic check on your own family trust deed, and if any of the following does occur, it may be more than wise to urgently seek professional advice:
Therefore, prevention is always better than cure. Rather establish beforehand whether your trust was indeed validly created or amended and whether it gives adequate powers and discretion to the trustees to utilise the trust effectively, than to discover the deficiencies when a dispute ensues or a specific power is needed by the trustees to act. This can be done by way of a legal audit which entails inter alia the checking of the validity of the trust, tax and other implications thereof, protection of beneficiaries against financial and other risks as well as the protection of the trust assets and beneficiaries in the event of divorce, as well as to what extent the rights of the beneficiaries may be affected by a possible amendment of the trust, to name only a few aspects.
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