What Your Independent Trustee Should be Doing, and Why It Matters

A family trust is established to protect and manage assets for the benefit of future generations. It is created by a founder and typically involves beneficiaries who are related to one another, with some trustees also serving as beneficiaries. This makes sound governance especially important. Family trusts are commonly used to safeguard family assets, reduce estate duty upon the founder’s death, and facilitate effective estate planning across generations.

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One of the fundamental legal principles behind any trust is the clear separation between those who control the trust and those who benefit from it. Managing and administering the trust lies with the trustees, while the benefits accrue to the beneficiaries. When this separation is blurred, the trust risks being viewed as the alter ego of the founder or trustees, effectively reducing it to a mere extension of their own affairs.

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Such a finding can have severe consequences. South African courts may disregard the trust structure entirely, stripping it of its asset-protection benefits and deeming the trust assets to belong to the founder personally, with significant legal and tax implications. In addition, trustees who fail to act impartially, independently, or in accordance with the law may be held personally liable for losses suffered by the trust or its beneficiaries.

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It is in this context that the role of the independent trustee becomes essential. South African courts have long emphasised the need for independent judgment in the administration of family trusts, most notably in the 2003 Land Bank of South Africa v Parker decision. This principle was reinforced in 2017 when the Master of the High Court issued a

directive requiring many family trusts — particularly those where trustees and beneficiaries are related — to appoint an independent trustee.

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While trusts established prior to the 2017 directive are not automatically required to appoint an independent trustee, they are still bound by the same legal standards of independence, separation of powers, and proper trust administration. In practice, older trusts are often required to appoint an independent trustee when trustees change, trust deeds are amended, or assets are transferred or restructured.

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All trustees, whether independent or not, are responsible for ensuring the proper administration of the trust. This includes complying with the trust deed, attending trustee meetings, submitting tax returns, maintaining accurate financial records of the trust’s assets and liabilities, and properly recording trustee resolutions and decisions. Given that these duties apply to all trustees, the question naturally arises: what should an independent trustee be doing in practice?

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An independent trustee is not merely someone who is unrelated to the beneficiaries. In most cases, an independent trustee is a professional who administers trusts as part of their ordinary course of business and who has a sound understanding of trust law. Their role is to exercise objective and independent judgment, particularly where other trustees may have personal interests or conflicts that could compromise impartiality.

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In practical terms, you should expect an independent trustee to:

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• · Apply objective, independent judgment to all trustee decisions

• · Ensure that decisions are taken jointly and properly recorded

• · Scrutinise transactions to confirm they are lawful and in the best interests of the trust

• · Identify and manage conflicts of interest between trustees and beneficiaries

• · Prevent the trust from being used as a personal instrument of the founder or trustees

• · Act as a safeguard against conduct that could expose the trust to legal or tax risk

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Independent trustees also add value by assisting with long-term planning and continuity, particularly when trustees or beneficiaries pass away or when family circumstances change. Their oversight becomes increasingly important as trust law in South Africa continues to evolve. Recent changes to tax reporting, compliance obligations, and regulatory oversight have significantly increased the administrative burden on trustees. Ignorance of these requirements is not a defence, and trustees may face serious financial penalties or personal liability for non-compliance.

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A properly appointed and active independent trustee can therefore play a vital role in reducing risk, ensuring ongoing compliance, and preserving the integrity and effectiveness of the trust structure over time.

 

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Stacy Rouchos BCom, LLB is Managing Director at Hobbs Sinclair Legacy

*Note: This is a general guide and should not be used as a substitute for professional advice. Always consult a professional for specific advice related to your circumstances.