I don’t think it’s far-fetched to say that our circumstances change constantly, and this can have a significant impact our estate planning.
Since trusts often play an important role in our financial planning, it’s equally important to review them regularly, as both legislation and circumstances change continuously.
The last thing you want is to undermine your own interests due to outdated trust clauses that no longer reflect your current circumstances, or leave the trustees unable to fulfil your intentions for the trust.
Trusts are often used as a tool in succession planning to protect farms for minors and heirs and assets in businesses. They are also useful for risk-, business-, and tax planning during your lifetime. It can be useful for planning what happens to your assets after death.
However, we often see outdated clauses or sections missing that could enable trustees to properly administer the trust.
A trust established during your lifetime—also known as an inter vivos trust—is essentially a contract between the founder and the trustees, where the latter must manage the assets for the benefit of the beneficiaries.
It’s important to know that trustees are appointed by the Master of the High Court, and any actions taken before such an appointment will be declared null and void.
The deed sets out the powers and duties of the trustees. For example, if it fails to grant certain powers to the trustees, their actions may be invalid.
An example would be if they want to make an investment on behalf of the beneficiaries without the trust granting them that authority. In this case, the trust deed would first need to be amended.
You don’t want to get caught in these pitfalls, so it’s essential to review the trust from time to time to ensure its provisions are still relevant and in line with the latest legislation.
One paragraph that can make or break a trust is the amendment clause. If it’s practical and in order, any other potential issue in the deed can be easily addressed.
Any amendment of the deed should not be taken lightly! Various factors must be considered to make a valid amendment.
For these reasons, it’s important to appoint a specialist to set up or amend the trust to ensure it contains the correct, enforceable clauses and that it can be properly amended.