Being a trustee for a family trust is not a simple thing - you have to ensure that all the administration is perfect
If someone appoints you as trustee in a will, you would think it is not such a big deal. You only have to ensure that the minor children get their regular payments and the rest of the time it is nothing to worry about. Right?
No. You are wrong, Gerard Abrahamse, general manager of ASI Property, says. “Despite the importance of estate planning, too few South Africans have a valid will, leaving their families vulnerable to prolonged legal battles, unexpected taxes and emotional disputes.”
Trustees play a key role in protecting your legacy and can avoid all these problems, as they manage your assets and property as directed by the deceased. However, despite good intentions, many make avoidable errors that can disrupt the process and hurt beneficiaries.
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Common trustee mistakes
Abrahamse says these are the most common mistakes trustees make in South Africa:
Choosing the wrong trustee
Appointing a trustee is a strategic decision. Many choose friends or family without considering their time, financial skills or impartiality.
Abrahamse warns that poor trustee selection is a leading cause of mismanagement. “That is why choosing someone responsible, financially literate and impartial is essential.”
Failing to transfer property into the trust
Setting up a trust is just the beginning, Abrahamse says. Assets like homes and bank accounts must be formally transferred; otherwise, they remain in the founder’s name and risk taxes or delays.
Families can encounter delays and costs if property titles are not updated to reflect trust ownership. Ensure all assets are legally registered in the trust’s name to avoid these issues.
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Founder retaining too much control
Founders of trusts often keep managing trust assets as if they still own them. This can backfire, as courts may declare the trust invalid if the founder did not relinquish control.
South African law requires trustees to act independently and impartially. “Mixing personal and trust assets can bring serious legal trouble. Keep trust assets separate and let trustees manage without interference to maintain legitimacy,” he warns.
Ignoring tax responsibilities
Trusts in South Africa have specific tax obligations. Abrahamse says many trustees are unaware that they are required to file tax returns for the trust or misunderstand how trust income is taxed.
Sars taxes trusts at a flat rate of 45% on income retained within the trust, making tax planning essential. Consulting a qualified tax professional ensures the trust remains compliant and financially efficient, helping to avoid penalties and unnecessary costs.
Trustees acting alone
Trustees must act jointly. When one trustee makes decisions without consulting the others, it can lead to disputes, invalid decisions and even legal challenges, Abrahamse says.
Lack of communication among trustees can jeopardise the trust’s integrity. Regular meetings, documented decisions and open dialogue are essential to maintain trust and ensure compliance with legal requirements.
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Without wills, families face chaos after a loved one’s death. Proper planning, including a valid will, a well-structured trust and competent trustees is crucial for protecting your assets and ensuring the future well-being of your loved ones.
