To Trust or Not to Trust…That is the question.

The “To Be or Not to Be” monologue by William Shakespeare is regarded as one of the most recognized scenes in English literature. It explores the themes of mortality and the dilemma between choosing life or death. Hamlet is contemplating his own existence while also considering whether he should murder his uncle. The beauty of this specific play (and the reason behind the somewhat familiar title of this article) is that it fits so beautifully with the current state of affairs regarding the new changes in South African Trust Law that came into effect on April 1, 2023. Firstly, trustees (Hamlet) plan around the two certainties in life, namely death and taxes (to live or to die). Secondly, they determine what effect it will have on the beneficiaries of the trust (Ophelia, the potential heir of Hamlet), and lastly, how they should go about the Master of the High Court (King Claudius) and SARS (Uncle Sam personified as the South African government).

Since the inception of the Trust Property Control Act 57 of 1988 (hereafter “TPCA”), the Act has not adapted to the ever-changing legal environment in South Africa. However, the TPCA was recently amended to rectify the deficiencies in South Africa’s regulatory framework by addressing beneficial ownership transparency. Section 1 of the TPCA defines “beneficial owner” as a natural person who directly or indirectly ultimately owns the relevant trust property; a natural person who benefits from the trust property; or a natural person who exercises effective control of the administration of the trust arrangements that are established pursuant to a trust instrument.

The recent amendments to the TPCA impose new duties on trustees, which briefly include the following:

Obligation to establish and maintain beneficial ownership registers:

Section 11A of the TPCA now requires trustees to establish, record, and keep up-to-date records of information related to beneficial owners of trusts, as specified in Regulation 3C. These records should include a wide array of information about each beneficial owner, such as their full names, date of birth, nationality, ID number, citizenship, residential address, contact information, tax number, etc.

Obligation to lodge beneficial ownership registers with the Master of the High Court:

According to Regulation 3D, trustees are now also required to lodge beneficial ownership registers on the Master of the High Court’s online portal. This is a vital step in complying with the new regulations and ensuring transparency in trust ownership. The following link can be used to navigate to the ICMS Master’s Office Web Portal.

Obligation to give law enforcement agencies access to beneficial ownership information:

Trustees are obligated to make information contained in the beneficial ownership registers available to certain law enforcement agencies. Some of these include the National Prosecuting Authority, the Independent Police Investigative Directorate, the South African Revenue Services, and the Financial Intelligence Centre.

Obligation to make disclosures to and record details of accountable institutions:

Section 10(2) of the TPCA requires trustees to inform accountable institutions with whom they engage in their capacities as trustees, that the transaction or business relationship deals with trust property. Furthermore, section 11(1)(e) of the TPCA also requires trustees to record the details of accountable institutions during their dealings. These details include the name of the accountable institution, registration details, and the nature of functions and services, to name a few.

It is clear from the exposition above, that the days of being a “sleeping” or inactive trustee have passed. It is imperative to have an independent trustee of a professional firm on board to attend to these new requirements. The penalties for non-compliance are severe and can vary between fines of up to R10,000,000 and/or imprisonment for a period not exceeding 5 years.

The question still remains: To trust or not to trust? Our Fiduciary Practitioners at BVSA have decades of experience in trust administration and are professionally equipped to provide you with expert advice so that you can sleep soundly at night knowing everything is in order.

So, choose wisely in whose hands you place your trust; choose BVSA.

Reghardt Draper FPSA®
Adv Dip ETA (UFS), LLB (NWU), LLM (NWU), PG Dip FP (UFS)
reghardt@bvsa.co.za