www.MyPE.co.za: I received an enquiry from an anxious client wanting to know whether he can be held personally liable for his actions as a trustee, writes financial planner Pieter Willem Moolman.
The answer is simple. Yes, of course you can!
In a recent Supreme Court of Appeal case it was found that trustees dealt with trust property without being authorised to do so and that they simply ignored the provisions of the trust deed.
Trustees are appointed to look after trust assets on behalf of the trust beneficiaries and receive their powers from the trust deed.
Nevertheless, trustees have a bad habit of making decisions without consulting the trust deed first. This is one habit trustees need to lose and the sooner the better.
As a trustee you shall have bare (non-beneficial) ownership of all trust property. This means trustees receive control over trust assets but must handle these in the best interest of the beneficiaries and not for their personal use and enjoyment.
Because trustees are co-owners of trust property, the trust deed will submit that decisions regarding any transaction in respect of trust matters should be reached by all trustees either unanimously or by way of a majority vote.
The trust deed will further grant trustees the power to borrow money on behalf of the trust, lend trust funds to beneficiaries, invest in movable and immovable property – the list is never-ending. However, the trust deed must authorise decisions being taken.
Trustees should therefore act jointly in trust affairs. They should study the trust deed and be confident that they have the power to act in a certain manner.
In terms of the Trust Property Control Act a trustee shall, in the performance of his duties, act with the care, diligence and skill that can reasonably be expected from a person who manages the affairs of another.
This must be remembered by trustees at all times as a trustee can be held personally liable for breach of trust where he fails to show the degree of care, diligence and skill required of him.
A record of decisions made by trustees regarding the trust must be kept in the form of resolutions. These are important and your financial planner can assist you with their drafting.
It might be a good idea to have your financial planner check all the decisions made by the trustees of your trust over the last few years.
Your financial planner can assist you in checking whether there are resolutions for each and every decision made. Examples may include loans to beneficiaries and lease agreements for immovable property bought in the trust and rented by you.
If these are not in place, the trustees are not acting in terms of the trust deed or the Trust Property Control Act and there can be serious consequences for both the trustees and the property held in trust.
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Pieter Willem Moolman is the founder of PWM Financial Management in Port Elizabeth in the Eastern Cape. Their mission is to provide financial security and create wealth for their clients.
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