The powers and duties of trustees in the transfer of immovable property

There often comes a time when a beneficiary becomes entitled to take transfer of a property that is registered in the name of a trust. When this happens, there are a few options available to the trust in order to put this into effect.

The ins and outs of subject to bond approval clauses

When does a beneficiary become entitled to property? 

A beneficiary may become entitled to take ownership of a property registered in the name of a trust according to the terms and conditions of a deed of trust, or upon termination of the trust.

Once this is determined to be the case, the property will have to be transferred into the name of the beneficiary by way of registration in the Deeds Office. The services of a transferring attorney will be required in order for this to be completed. The trust deed will stipulate the reason for the transfer, as well as the relevant powers of the trustees to effect this.

What are the duties of a trustee?

A trustee must, at all times, act in the best interest of the beneficiaries of the trust with the highest possible degree of good faith (“uberimae fides”). With this in mind, the following options are open to the trustees: 

The first way in which the trustees may choose to proceed is by selling the property belonging to the trust to a third party. The proceeds of the sale will then be distributed to a sole beneficiary or multiple beneficiaries as determined by the deed of trust. 

Alternatively, the trustees may decide to transfer the property to the beneficiary/ies first, for a nominal value, after which the beneficiary/ies may proceed with a follow-on transfer to a third party should they wish. 

The benefit of the latter option is that it may avoid the trust becoming liable for considerable capital gains tax. In addition, in terms of the Transfer Duty Act, the first of these two separate transfers will be exempt from transfer duty while the second will be subject to transfer duty. It is worth noting that this is considered to be an exercise in tax avoidance rather than tax evasion, which is illegal. As such, it will ultimately be to the benefit of the beneficiaries which is one of the fundamental roles of the trustees.

There are, however, some instances often based on the value of the property where the second option outlined above may not be the most beneficial route to take. For example, the individual exemption relating to the first million Rand of the property may be less relevant as the value of the property increases. 

What are the powers of a trustee?

Transferring the property from the trust into the name of the relevant beneficiary/ies is only possible if the powers of the trustees specifically make allowance for this. For example, a clause such as the following is included:

“The trustees are entitled in their discretion, to transfer any of the trust assets or trust income to the trust beneficiaries even before the termination of the trust, and the said beneficiaries are then entitled to deal with such property or income as their own exclusive property…….” 

Should the powers of the trustees not make provision for this transfer as above, or the powers of the trustees cannot be established (e.g. the trust deed has been lost), the trust deed will have to be amended at the Masters Office if this is provided for, or the High Court must be approached for an order to such effect. This order will then be the causa in the deed of transfer. 

The conveyancer signing the preparation certificate on the deed of transfer will assume responsibility for the fact that the powers of the trustees in the trust deed specifically authorise such a transfer. It must be noted that there are no common law powers that can be referred to in the absence of specific powers set out in the trust deed.

Follow Snymans on Facebook for more legal information, tips and news about property.

Recommended for you

Property Blog Articles | Advice | Contractual Matters | Market News
Contractual Matters

Buying and selling property – the implications for married foreign nationals[post_view before=""]

In a recent article, we looked at the question of whether foreign nationals are permitted to own property in South Africa. A related question is what happens when a foreign national, who has entered into a marriage outside of South Africa, wishes to buy or sell property. Let’s take a look.

Read More
Property Blog Articles | Advice | Contractual Matters | Market News
Contractual Matters

Foreign property ownership in South Africa[post_view before=""]

Can foreign nationals own property in South Africa? The short answer is yes. But before we explore this topic in any detail, let’s first define what we mean by foreign national – someone who is a non-resident, meaning that they are neither ordinarily resident nor meet the requirements of the physical presence test.

Read More
My name has changed - what happens to my property’s title deed?
Contractual Matters

Power of Attorney: Can it lapse?[post_view before=""]

A power of attorney is a useful tool that can be used in many situations. For example, an elderly parent who, due to their age, finds it difficult to attend to their affairs may decide to grant power of attorney to their adult child.

Read More
Property Blog Articles | Advice | Contractual Matters | Market News
Contractual Matters

Why identifying the ultimate beneficial owner matters[post_view before=""]

In the past, detecting funds from unlawful activities as they entered the financial system was relatively straightforward. However, with the dishonest among us increasingly making use of juristic or corporate entities to hide their true identities and introduce illicit proceeds into the system, it’s becoming more and more difficult for the relevant authorities to identify these funds. And it’s not only South African officials who find themselves in this position – the challenge cuts across international borders.

Read More
Minors and immovable property
Contractual Matters

How does divorce affect transfers in the case of joint ownership?[post_view before=""]

The end of a marriage can result in several administrative challenges, not least of which is tackling the joint ownership of immovable property. And while divorce can be a traumatic and emotional experience, with the proper legal advice, the transfer of ownership doesn’t need to be.

Read More

Need more Snymans content?

Sign up for our monthly newsletter.

The powers and duties of trustees in the transfer of immovable property

There often comes a time when a beneficiary becomes entitled to take transfer of a property that is registered in the name of a trust. When this happens, there are a few options available to the trust in order to put this into effect.

The ins and outs of subject to bond approval clauses

When does a beneficiary become entitled to property? 

A beneficiary may become entitled to take ownership of a property registered in the name of a trust according to the terms and conditions of a deed of trust, or upon termination of the trust.

Once this is determined to be the case, the property will have to be transferred into the name of the beneficiary by way of registration in the Deeds Office. The services of a transferring attorney will be required in order for this to be completed. The trust deed will stipulate the reason for the transfer, as well as the relevant powers of the trustees to effect this.

What are the duties of a trustee?

A trustee must, at all times, act in the best interest of the beneficiaries of the trust with the highest possible degree of good faith (“uberimae fides”). With this in mind, the following options are open to the trustees: 

The first way in which the trustees may choose to proceed is by selling the property belonging to the trust to a third party. The proceeds of the sale will then be distributed to a sole beneficiary or multiple beneficiaries as determined by the deed of trust. 

Alternatively, the trustees may decide to transfer the property to the beneficiary/ies first, for a nominal value, after which the beneficiary/ies may proceed with a follow-on transfer to a third party should they wish. 

The benefit of the latter option is that it may avoid the trust becoming liable for considerable capital gains tax. In addition, in terms of the Transfer Duty Act, the first of these two separate transfers will be exempt from transfer duty while the second will be subject to transfer duty. It is worth noting that this is considered to be an exercise in tax avoidance rather than tax evasion, which is illegal. As such, it will ultimately be to the benefit of the beneficiaries which is one of the fundamental roles of the trustees.

There are, however, some instances often based on the value of the property where the second option outlined above may not be the most beneficial route to take. For example, the individual exemption relating to the first million Rand of the property may be less relevant as the value of the property increases. 

What are the powers of a trustee?

Transferring the property from the trust into the name of the relevant beneficiary/ies is only possible if the powers of the trustees specifically make allowance for this. For example, a clause such as the following is included:

“The trustees are entitled in their discretion, to transfer any of the trust assets or trust income to the trust beneficiaries even before the termination of the trust, and the said beneficiaries are then entitled to deal with such property or income as their own exclusive property…….” 

Should the powers of the trustees not make provision for this transfer as above, or the powers of the trustees cannot be established (e.g. the trust deed has been lost), the trust deed will have to be amended at the Masters Office if this is provided for, or the High Court must be approached for an order to such effect. This order will then be the causa in the deed of transfer. 

The conveyancer signing the preparation certificate on the deed of transfer will assume responsibility for the fact that the powers of the trustees in the trust deed specifically authorise such a transfer. It must be noted that there are no common law powers that can be referred to in the absence of specific powers set out in the trust deed.

Follow Snymans on Facebook for more legal information, tips and news about property.