New Rules for Trustees: Reporting Who Benefits from Trusts

 Introduction:

Effective from 1 April 2023, trustees must establish, record, and maintain an up-to-date record of information relating to the beneficial ownership of trusts.

This relates to amendments to the Trust Property Control Act, 1988 (Act No. 58 of 1988) ("the TPCA") that requires trustees of mortis causa (created by wills) or inter vivos (while someone is alive) trusts to document and maintain, in a register to be submitted to the Master of the High Court, the particulars of each beneficial owner. Trustees must submit the record electronically through a platform provided by the Master of the High Court.

Section 1 of the TPCA defines "beneficial ownership" to mean:

• a natural person "…who directly or indirectly ultimately owns the relevant trust property"; or
• a natural person who exercises effective control of the administration of the trust arrangements; or
• each founder of the trust; or
• each trustee of the trust; or
• each beneficiary referred to by name in the trust instrument or other founding instrument in terms of which the trust is created;
• if a beneficiary is a legal person, partnership or trust, the natural person controlling that entity.

Conclusion:

Trustees must record details about people who benefit from trusts. These details include full names, birthdates, nationalities, official IDs, home addresses, contact information, how they benefit, and when their benefits start and end. Trustees must also keep copies of their IDs or passports. The regulations also say that trustees must record information about any organizations or people they hire to help with trust matters. These could be lawyers or financial experts. The trustee has to update this information regularly to make sure it is correct.

The changes introduce penalties for trustees who do not follow these rules. If trustees do not report the right information or keep it up to date, they could be criminally charged. This could mean a substantial fine, up to R10 Million, or even up to 5 years in prison. It is not clear yet how strictly these new rules will be enforced. But one thing is clear: Being a trustee now comes with more responsibilities than before.

 

Navigating Estate Challenges: Widow's Resistance to Property Sale

 Introduction

An executor had to sell a home to settle estate debts, but the widow refused to consent to the sale. An examination of Bester NO v Master of the High Court [2023] ZAWCHC 208.

Background 

To finalise the estate, the executor (the applicant) needed to have sufficient funds to pay creditors, the administration costs of the estate, the advertising, the Master’s fees, and the executor’s fees. To raise such funds, he had no option but to sell the estate’s Hout Bay property. However, the surviving spouse and sole heir did not want the property to be sold, for several reasons, the main one being that she would then have nowhere to stay.

Under section 47 of the Administration of Estates Act (the Act), such a sale requires the heir’s consent to the manner and conditions of the sale and, if such consent is not given, then the property is to be sold in a manner and on conditions approved by the Master. 

The reason for this is that the Master plays an oversight role in relation to the manner and conditions of sale of an estate’s assets. In situations like this one, where there was a sole heir who did not consent, the Master’s approval was required. 

The executor wrote the Master who was grossly dilatory in failing to respond to the applicant’s request for approval. 

Legal Proceedings

As the Master failed to respond to the applicant’s request for approval under section 47 of the Act, the executor approached the court for an order authorising him to sell the house on specified terms and conditions, so that sufficient funds were realised to finalise the estate. The widow opposed the application.

The Court's Ruling

The Master’s failure to respond to the applicant’s request for approval under section 47 of the Act was reviewed and set aside. The decision was remitted to the Master who was directed to decide on the manner and conditions of the sale of the immovable property within two months of the date of service of the order.