By Sanette Viljoen
Approximately 95% of trusts in South Africa are discretionary family trusts. Such a discretionary trust is distinguished from a trust, where the beneficiaries have established rights to receive a certain portion of the profit and capital of the trust. The most common trust or family trust is a discretionary trust. In the case of a discretionary trust the beneficiaries have no established rights and the trustees can decide to what extent the beneficiaries will benefit from the trust.
In the case of a discretionary trust there are two strategies for excluding a beneficiary from any benefits from the trust. In the first instance the trustees can simply decide not to let the beneficiary concerned draw any benefit, in other words the trustees may decide to whom they want to make allotments or not. This is solely within the discretion of the trustees of a discretionary trust.
The second possible strategy has to do with the amendment of the trust deed. Every trust deed has an amendment clause that will determine how the trust can be amended.
When a beneficiary accepts a benefit from a trust, he becomes a contract party to the trust. The result is that the beneficiary must also approve any amendment of the trust deed. In other words, if a beneficiary has already accepted a benefit from the trust, that beneficiary must also approve the amendment of the trust deed. If the trust is amended in such a way that this beneficiary is excluded, the beneficiary naturally will not approve the amendment.
If a beneficiary has not yet received a benefit from the trust, he or she is not yet a party to that trust and his or her approval is not necessary.
The amendment of a trust will naturally depend on the amendment clause of the trust deed. If the parties do not agree about the amendment, they will have to approach the court for the amendment of the trust deed.