By Sanette Viljoen
When you are contemplating a trust as an entity, it is first and foremost important to understand the essence of a trust. In other words, what is a trust?
A trust is an agreement/contract between the founder of the trust and the trustees of the trust for the benefit of a third party, namely the beneficiaries of the trust.
The founder therefore is the person who establishes the trust, the trustees are the persons who control and act on behalf of the trust and the beneficiaries are the persons who benefit from the trust.
In contrast to a company, a trust is not founded and created in terms of the stipulations of legislation, but by way of a trust deed. This document serves as a deed of foundation. In essence this trust deed therefore takes the form of a contractual agreement between the founder, trustees and beneficiaries.
The trustees are only entitled to handle the trust in accordance with the stipulations contained in the trust deed. If the trust deed prohibits trustees from entering into certain transactions or act in a certain manner, it would be illegal if a trustee did so. The founder, other trustees and the beneficiaries can in such a case act against the illegal conduct of that trustee by approaching the court.
The trust deed must also be looked at for guidance regarding how it could be amended, should the need arise. The trust deed for example prohibits the trustees from buying fixed property, but this is exactly why the trust was founded. Clearly the trust deed will then have to be amended for this purpose.
If you intend founding a trust, it would be advisable to approach your lawyer, specifically for the compilation of an appropriate trust deed to justify the purpose of the trust.