A Trustee is responsible for managing all of the property owned by a trust for the benefit of the trust beneficiaries. The exact duties of a trustee will vary based on what assets are owned by the trust. For example, if the trust consists of bank and investment accounts, then The trustee will be responsible for overseeing these accounts. Or, if the trust owns rental real estate, then the Trustee will be responsible for managing the rental property.
The Trustee can, depending on state law and the terms of the trust the agreement, delegate certain duties to others, such as hiring a financial advisor to oversee investments or hiring a property manager to oversee rental real estate. But the Trustee must use good judgment and due diligence when delegating duties and must also avoid any conflicts of interest (such as hiring a sibling as the trust's investment advisor) unless the beneficiaries consent.
An independent trustee is a person who cannot benefit from the income or assets of the trust, nor are they related to a beneficiary of the trust, and can thus play a crucial role in the proper separation between ownership of the trust assets and the enjoyment thereof.
In a landmark case in 2005 – Land and Agricultural Bank of South Africa v Parker – the Supreme Court of Appeal ruled that there was no proper separation of ownership or control of the trust assets from their enjoyment or use. As the trustees are entrusted with the control of the assets in the interest of the beneficiaries, inadequate separation may result in the trust being regarded as an extension of the estate of the founder.
The court suggested the appointment of at least one independent outsider as trustee to every trust where all the beneficiaries are related to one another, which resulted in the Master of the High Court enforcing the principle and requiring all newly formed family business trusts to appoint at least one independent trustee.
A simple definition of an independent trustee is someone who is not related to the founder or trustees and who has no beneficial relationship with them. This should ensure adequate separation of control from enjoyment. A trustee must not be swayed to support any decisions of the founder or co-trustees for fear of losing fees. A trustee who is also a service provider of the trust should be subject to the scrutiny of an independent trustee to ensure everything is undertaken at arms’ length and to maintain due care and diligence.
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A trust is an agreement between an owner of assets and trustees. In terms of this agreement, the trustees undertake that they will administer the trust's assets with the necessary care to the benefit of the beneficiaries. It is an efficient and flexible way to ensure that assets are looked after. It also ensures that assets are objectively managed and controlled by appointed trustees in the best interests of the beneficiaries.
The protection of your loved ones' financial interests is extremely important in the planning of your estate. You want to be sure that your family, and especially minors, will be looked after, and that your estate and income tax obligations are kept as low as possible, so that your heirs can enjoy the full benefit of your estate.