Cape Coastal Homes Logo
You are here: Cape Coastal Homes / Latest News / What Are The Powers And Duties Of Trustees In The Transfer Of Immovable Property

What Are The Powers and Duties of Trustees in the Transfer of Immovable Property?


What Are 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. 

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.

Author Snymans Inc Attorneys
Published 05 Nov 2019 / Views -
Disclaimer:  While every effort will be made to ensure that the information contained within the Cape Coastal Homes website is accurate and up to date, Cape Coastal Homes makes no warranty, representation or undertaking whether expressed or implied, nor do we assume any legal liability, whether direct or indirect, or responsibility for the accuracy, completeness, or usefulness of any information. Prospective purchasers and tenants should make their own enquiries to verify the information contained herein.