Essential Requirements for a Valid Trust

Written on 07/01/2021
MJ Minter Inc

The structure and essential requirements for a valid trust can be found below:

  • The founder must have a serious intention to create a trust and transfer control.
  • The key element of the trust arrangement is the transfer of control of the trust assets from the founder to one or more trustees, who hold the trust assets, not in their personal capacities, but for the benefit of the trust beneficiaries. The trust is essentially an arrangement that allows someone to hold assets for the benefit of the trust beneficiaries. The Trust Property Control Act defines a trust as "...a structure into which property is transferred, which is then administered by trustees, on behalf of one or more beneficiaries, in accordance with the trust instrument...".
  • The trust property must be clearly identified.
  • The trust object (which could be personal or impersonal) must not be vague but must be clearly stated and lawful.
  • There must be a binding obligation on the trustee(s) to administer and manage the trust property.
  • The trustees must be authorised and have capacity (for example, in South Africa, when you turn 18, you are free to contract and conduct your own affairs without your parent or guardian’s assistance).
  • There must be at least one beneficiary.
  • The trust beneficiaries must be clearly identified or easily identifiable.
  • Note that the Trust Property Control Act does not specify the requirements or procedures required for the formation of a valid trust in South Africa. The Master of the High Court might have issued Letters of Authority, and assigned a registration number to the trust, but this does not necessarily make the trust valid. Usually, the validity of a trust instrument is only tested by its creditors, or the South African Revenue Service (SARS) or by a spouse in a divorce case.