Article 3: The Trust in Action - What Keeps It Alive

This article forms part of our three-part series on Trusts in South Africa, exploring what they are, how they are created, and how they work in practice. The aim is to make an often complex topic clear, relevant, and accessible to everyone.

Once a trust has been registered, its real test begins. A trust is not a document to be filed away; it is a living legal structure that depends on the actions, integrity, and administration of the people appointed to manage it. In practice, many trusts fail not because the trust deed was defective, but because they are not managed properly after registration.

At the heart of every trust are the trustees. They are the individuals chosen by the founder in the trust deed, but they are only officially appointed by the Master of the High Court. Their appointment becomes valid only once their names appear on the Letter of Authority (LOA) issued by the Master. This document is the legal proof of who may act on behalf of the trust. If a person’s name is not on the LOA, they are not a trustee and may not sign documents, make decisions, or act for the trust in any capacity.

For this reason, keeping the Letter of Authority updated is absolutely critical. When a trustee resigns, passes away, or becomes disqualified, the trust may not simply “carry on” informally. The Master must be notified, and the correct supporting documents must be lodged so that an amended LOA can be issued. Until this is done, the person who resigned remains reflected as a trustee on the official record. In practice, this can bring important transactions to a complete standstill. Most financial institutions require a resolution signed by all trustees listed on the LOA when the trust applies for a loan or stands surety. A former trustee who has already resigned will not sign such a resolution, and the bank will not proceed until the LOA is corrected.

Beyond the LOA, trustees must remember that their powers come with serious responsibilities. They must act honestly, with care, and independently. Their decisions must be made jointly, recorded in writing, and supported by proper minutes and up-to-date financial records. The trust must have its own bank account, and its funds must never be mixed with the personal funds of trustees or beneficiaries. Trustees must also submit annual tax returns and maintain open communication with beneficiaries. These practical steps give the trust structure, credibility, and legal protection.

For a trust to operate effectively, five essential elements must exist:

1. Intention – The founder must have had a clear and lawful intention to create the trust, and that intention must be reflected in both the trust deed and the administration that follows.

2. Control – The founder must relinquish control of the trust assets. If they continue to treat the property as their own, the trust may not be recognised legally.

3. Separation – Trustees must act independently and avoid conflicts of interest. There must be a real separation between the role of trustee and the role of beneficiary.

4. Accountability – Trustees are accountable to both beneficiaries and the Master of the High Court. They must be able to justify every decision as being in the best interests of the trust.

5. Clarity – Beneficiaries must be clearly identified or identifiable. Uncertainty invites disputes and can even lead to the trust’s failure.

Where these elements are present, a trust operates as intended: a reliable and legally sound method for managing assets for the benefit of others. When they are absent—especially when the LOA is outdated or trustees do not act jointly—administration becomes risky, and the trust may face legal or operational difficulties.

While a well-run trust offers significant advantages, from asset protection to long-term continuity, it is not suitable for every situation. Trusts carry administrative duties, costs, and formalities that must be taken seriously. Poor administration can undermine even the most carefully drafted trust deed.

As one South African judge noted, “A trust is built not on paper, but on conduct.” This remains the clearest reminder that the real strength of a trust lies in its daily management. When handled with care and respect, a trust can support generations, protect family assets, and honour the founder’s intentions long after they are gone.

Written by: Maret Carroll and Irma Gaybba
Moderated and approved by: Stacey Barnard

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