How to protect a trust The Offshore Perspective Sham or not…. Anton Maskowitz

How to protect a trust
The Offshore Perspective
Sham or not….
Anton Maskowitz
[email protected]
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Agenda
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•
•
•
•
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The basics
Sham vs Alter Ego
Settlor/Beneficiary control
Reserved Powers
Communication
Conclusion
Anton Maskowitz
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The Basics
• Trust Deeds
•
•
Declaration Deed
Settlement deed
• Blind Trusts
•
Charitable Beneficiaries
• Protectors (SA specific)
•
•
•
Co- Trustee/excess powers
Settlor
Independence
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Sham vs Alter Ego
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•
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Concept of a Sham Trust
Not recognised in SA (yet)
Requirements
Consequences
SARS, Divorce settlements and
maintenance claims?
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Settlor/Beneficiary Control
• Treating trust as bank account
• “My Trust”
• Managing/Controlling Trust
Investments
•
•
•
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Reserved Powers
Investment Managers/Advisors
Directors on underlying Companies
Settlor/Beneficiary also Protector
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Communication
• Steer clear from “instructing”
trustees
• Know your trustees and vice versa
• Annual Trustee Meetings
• Update trustee re personal and
family circumstances
• Review Letters of Wishes regularly
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Conclusion
• Don’t give without giving
• Independent/Corporate Trustee in well
regulated environment
• Understand and appreciate Trustee
Powers at outset
• Steer clear from “instructing” trustees
• Care : Divorce Settlement/Maintenance
claims and SARS not reliant in Sham, will
most likely succeed on alter ego.
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The effect of marital regimes
on wills and estate planning
Till death
Tiny Carroll
or divorce
us do part
estate planning
Distribution
Accumulation
Preservation
estate planning : four estates
PERSONAL
TRUST
ASSETS
ASSETS
CONTRACTUAL
RETIREMENT
FUND BENEFITS
ARRANGEMENTS
estate planning : life happens
dependents
marital
regime
trust
structures
emigration
insolvency
business
structures
offshore
divorce
retirement
disability
Three vital questions
Who qualifies as a spouse ?
Which marital property regime?
Are you a surviving spouse?
Personal assets : Exclusion clause
I direct that the inheritance devolving upon any beneficiary under
this will as well as the proceeds, the reinvestment of such proceeds
and the income thereon shall be free from the legal effects, including
any accrual system, of any present or future marriage of such
beneficiary and shall also be protected against the creditors of their
spouses.
- Accrual marriages
- In community marriages
- Section 21 of the Insolvency Act
Personal assets : accrual claim
- Which spouse has the claim?
- Liquidity?
I hereby wish to place on record that in the event of me predeceasing
my spouse, and should my estate be entitled to monies from my
spouse, by virtue of the application of the accrual regime to our
respective estates, then my spouse shall not be required to realise
any assets or to transfer any assets in specie to the FAMILY TRUST,
but the amount owing, if he so chooses, shall be reflected as a debt
owed by him to the said Trust, which debt shall not accrue any
interest and shall be repayable without fixed date.
Contractual arrangements:
Buy and sell agreements
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Marriages in community of property
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Joint powers of administration
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Section 15(2)(c) – requires written consent
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Section 15(6) – 15(2)(c) does not apply where and act is
performed in the ordinary course of profession trade or business.
8 Key Questions
1.
2.
3.
4.
5.
6.
7.
8.
Do you have a strategic estate plan in place?
Do you have a signed, and up to date will in place?
Will “your” trust stand up to scrutiny?
Are your buy-and-sell arrangements going to protect
you?
Are your policy beneficiary nominations up to date?
Is there sufficient liquidity in your estate?
How will your retirement fund benefits be dealt with?
Will your family know what to do?
How to protect a trust
The local perspective
Louis van Vuren
CFP®, FPSA®, TEP
[email protected]
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Understand what is a trust –
and what it is not
• The trust concept
• Parties to a trust
• The trust deed
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The trust concept
•
The making over of ownership of or control over assets
to a person (trustee) for the benefit of another (the
beneficiary). Sec 1 of Trust Property Control Act, 57 of 1988
•
“The core idea of the trust is the separation of
ownership (or control) from enjoyment.” Landbank v Parker
[2004] 4 All SA 261 (SCA) at par 19
•
“Except where statute provides otherwise, a trust is not
a legal person. It is an accumulation of assets and
liabilities.” Landbank v Parker at par 10
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The parties to a trust
Founder
Trustees
The Trust Estate
Estate
Owner
Assets & Liabilities
Income
beneficiary
Capital
beneficiary
Income
beneficiary
Louis van Vuren
Capital
beneficiary
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The trust deed
•
The trust deed is “… is the trust’s constitutive charter.
Outside its provisions the trust estate can not be bound.”
Landbank v Parker at par 10
•
A trustee can do anything legal when empowered by
the trust deed, but has no powers not explicitly or
implicitly authorised by the trust deed or by law.
•
Sometimes a trust deed can be amended and the deed
will prescribe how. If the founder is alive it can in any
event be amended.
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How to protect a trust – as founder / estate
owner
•
Ensure that the trustees are independent of thought and
behaviour.
•
Accept that you don’t own the assets any more – they
belong to the trustees now.
•
Do not insist on the reservation of special powers.
•
Don’t put pressure on the trustees to act in your interest
in breach of their fiduciary duty towards the beneficiaries.
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How to protect a trust – as trustee
• Study the trust deed. If you don’t, you:

Are not acting in the best interests of the beneficiaries;

Can be held liable because you did not do what you should have.
• Understand your duties and powers – IT IS YOUR DUTY !

Fiduciary duty is overarching (sec. 9 of the TPCA);
 Care, diligence and skill expected of a person who manages affairs of
another

Duty to apply your mind independently.
 Don’t be a “tame” trustee
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How to protect a trust – as trustee (cont.)
• Act jointly with other trustees – follow the trust deed.

There is no “automatic” provision in law for majority decisions. If
the trust deed does not provide for it, decisions are by consensus.
• Ensure clean, effective administration.

Keep proper accounts. No requirement for audited financials, but
make sure there are annual accounts.

Ensure separate income and capital accounts.

Ensure proper records are kept – minutes of meetings.

Ensure proper resolutions are taken and recorded – follow the trust
deed religiously.
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How to protect a trust – as trustee (cont.)
• Ensure clean, effective administration. (cont.)

Ensure proper and effective control over trust assets – don’t allow
the previous owner to carry on controlling the assets.

Ensure proper investment of trust assets – take heed of the
investment powers in the trust deed.

Be aware of the requirements of relevant legislation.

Avoid conflicts of interest and declare to co-trustees if present.

Ensure tax affairs are in order – don’t mess with SARS.
 Attribution equals vesting – ensure it is recorded as such.
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The Protector in South African Trust Law?
• In UK and offshore destinations – protector to ensure
trustees act in best interests of beneficiaries and to get arms
length away from founder/estate owner.
• SA trust law does not know this phenomenon.
• The issue of independence addressed in Parker case –
although not a requirement that there must be an
independent trustee.
• My view – just make sure trust deed and the trustees
contribute to independence from the founder/estate owner.
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Questions
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Trustees to act jointly
Even where majority decisions are provided for – beware!
Steyn N.O. & Others v Blockpave (Pty) Ltd [2010] ZAFSHC 134
AJ Steyn
CP Pretorius
ME Moolman
Dries
Steyn
Trust
Rental agreement
in arrears
Blockpave
(Pty) Ltd
P Steyn
AJ Steyn J
J Steyn
Was not invited to trustee
meeting where decision
was taken to sue
Blockpave (Pty) Ltd.
Fixed
Property

Court found trustees not
properly before court, as
Moolman was not in position to
take part in decision to sue.
Return
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