SU 4- CREATION OF A TRUST
SA law recognises the existence of a trust in the strict sense only if it was validly created
Law sets a number of requirements for a trust’s creation
No trust comes into existence if 1 or more of these requirements are not met
Once a trust has been created- further requirements must be satisfied for trust
admin to commence
REQUIREMENTS FOR THE CREATION OF A VALID TRUST
Administrators, Estate Richards v Nichol- listed requirements
1. An intention on the part of the founder to create a trust
2. The expression by the founder of the intention to create a trust in a mode suited to
the creation of a legal obligation
3. A reasonably certain definition of the trust property
4. A reasonably certain definition of the trust object
5. The lawfulness of the trust object
1. AN INTENTION TO CREATE A TRUST
An intention to create a trust is readily inferred from the wording of the trust instrument
Trust instrument must clearly express this intention
o Preferably do so in peremptory language
Required for the trust instrument to convey the founder’s unequivocal intention to create a
trust by imposing a binding trust obligation on the trustee or on another
Doubts regarding the intention to create a trust-
Intention must be determined through proper interpretation of the trust instrument
A. The Sham trust
Inter vivos trust is by its very nature more susceptible to being a sham trust
It is an arrangement that appears to be a trust but that is in fact anything but a trust
Zanberg v Van Zyl-
Parties to a contract usually express themselves in language that unequivocally
embodies their agreement
o They intend the contract to be exactly what it purports to be and the shape
the contract assumes corresponds precisely with the parties’ intention
Sometimes contracting parties conceal a contract’s real character insofar as they call
it by a name or give it a shape intended not to express but to disguise its true nature
When a court is asked to adjudicate on any rights under a contract- it can only do so
by giving effect to what the transaction really is and not according to the shape it
purports to be
, The maxim plus valet quod agitur quam quod simulate concipitur applies in such a
case
o To denote that what the parties did (or intended) is more important than
what the parties seem to have done (or intended)
Court must examine the facts of each case in which the allegation of a simulated
contract is made to determine whether a real and ascertainable intention exists that
differs from the simulated intention devised by the contracting parties
Two permutations of the sham trust exist-
1. Possible that the founder did not intend to create a trust but instead intended to
create some other legal institution
Khabola v Ralitabo-
o Trust was ostensibly created ito a trust deed that described the applicant as
the donor and the other parties as the co-trustees
o Applicant conducted farming activities on the supposed trust properties
o Co-trustees were required to contribute financially to this venture
o No trust beneficiaries were appointed
o Court reasoned that the parties seemed to have intended the creation of a
partnership rather than a trust
o But simulated their arrangement to appear like a trust
2. Where the founder never intended to create any specific legal institution but only
used the name and/or form of a trust to gain some or other advantage that the law
does not otherwise bestow
B. The Alter ego trust
No functional separation and normally in family trusts
Trust that is validly created and exists as a trust but is open to abuse by its trustees or
beneficiaries
Niewoudt v Vrystaat Mielies (Edms) Bpk-
Emergence of a “newer type of trust”
Where a trust is created while everything else remains as before
Land and Agricultural Bank of SA v Parker-
Core idea of the trust is debased in this newer type of trust
Because the trust is employed to permit everything to remain as before
o And not to separate the beneficiaries’ enjoyment from the trustee’s control
2. THE EXPRESSION OF THE INTENTION IN A MODE SUITED TO CREATE AN OBLIGATION
The intention to create a trust must be expressed in a mode appropriate to create a legal
obligation
Contained in an inter vivos trust, testamentary trust or a court order
,The legal obligation imposed- depends on situation whether trustee has been appointed or
not
If the trust property has already been transferred to or placed under the control of a
duly appointed trustee- obligation is one that is imposed on that trustee to
administer the trust property in accordance with the trust instrument’s prescripts to
attain the trust object
If a trustee has not yet been appointed, has not yet assumed office or has not yet
been vested with either the ownership in the trust property or control over the trust
property
o The obligation is one that is imposed on the founder or another to enable the
trustee to administer that property
o Subject to the trust
A trust is validly created even if there is no trustee in office- a trust will not fail for the want
of a trustee
If a trust instrument determines that a specified minimum number of trustees must at all
times occupy the trustee office- and the number of trustees in office falls below the
minimum or trustee office becomes completely vacant-
Trust obligation does not fall away
Trust continues to exist
The necessity of the trust instrument imposing a trust obligation holds an important
implication for the creation of an inter vivos trust
The appointment of a trustee and a trustee’s acceptance of such appointment as well
as the trust obligation that accompanies it
Necessary for the creation of an inter vivos trust
3. A DEFINITION WITH REASONABLE CERTAINTY OF THE TRUST PROPERTY
Section 1-“trust property” or “property”
Movable or immovable property
And includes contingent interests in property
Which are to be administered or disposed of by a trustee in accordance with the
provisions of a trust instrument
Trust’s property must be identified with reasonable certainty in the trust instrument or must
be identifiable with reasonable certainty ito criteria set out in the trust instrument
Failure to identify a trust’s property with the requisite degree of certainty- invalidates
that trust
, 4. A DEFINITION WITH REASONABLE CERTAINTY OF THE TRUST OBJECT
Peterson v Claassen-
Court distinguished between a trust’s object and a trust’s purpose
Trust’s object-
o Usually stated clearly in the trust instrument
o All the parties dealing with a trust are regarded as having knowledge of the
trust’s object
Trust’s purpose-
o That which is sought to be achieved through the use of the trust regardless of
its stated object
If a trust instrument does not provide an adequate indication of the trust’s intended object-
no trust is created
If the founder intends a trust to attain an impersonal object-
Trust instrument must stipulate that object with sufficient certainty
5. LAWFULNESS OF THE TRUST OBJECT
Object of a trust must be lawful
Unlawful if it is illegal or contrary to public policy
Provisions that occasion unfair discrimination do not necessarily render the object of the
trust unlawful
REQUIREMENTS FOR TRUST ADMIN TO COMMENCE
Once the foregoing requirements have been met and a trust is created- 2 further
requirements must be satisfied for trust admin to commence
1. Presence of a duly appointed trustee who has accepted the appointment
2. Transfer of the trust property to the trustee or the trust beneficiary
1. A TRUSTEE
Presence of a trustee is not essential to the creation of a valid trust
But crucial for administering the trust
Trust administration commence only once a trustee is in office
If the trustee office is vacant or cannot be filled upon a trust’s creation-
The Master and the HC are empowered to appoint a trustee
In order to ensure the commencement of trust admin
Trustee’s failure to comply with the statutory duties and procedures does not prevent the
commencement of trust admin- but makes it difficult to continue
SA law recognises the existence of a trust in the strict sense only if it was validly created
Law sets a number of requirements for a trust’s creation
No trust comes into existence if 1 or more of these requirements are not met
Once a trust has been created- further requirements must be satisfied for trust
admin to commence
REQUIREMENTS FOR THE CREATION OF A VALID TRUST
Administrators, Estate Richards v Nichol- listed requirements
1. An intention on the part of the founder to create a trust
2. The expression by the founder of the intention to create a trust in a mode suited to
the creation of a legal obligation
3. A reasonably certain definition of the trust property
4. A reasonably certain definition of the trust object
5. The lawfulness of the trust object
1. AN INTENTION TO CREATE A TRUST
An intention to create a trust is readily inferred from the wording of the trust instrument
Trust instrument must clearly express this intention
o Preferably do so in peremptory language
Required for the trust instrument to convey the founder’s unequivocal intention to create a
trust by imposing a binding trust obligation on the trustee or on another
Doubts regarding the intention to create a trust-
Intention must be determined through proper interpretation of the trust instrument
A. The Sham trust
Inter vivos trust is by its very nature more susceptible to being a sham trust
It is an arrangement that appears to be a trust but that is in fact anything but a trust
Zanberg v Van Zyl-
Parties to a contract usually express themselves in language that unequivocally
embodies their agreement
o They intend the contract to be exactly what it purports to be and the shape
the contract assumes corresponds precisely with the parties’ intention
Sometimes contracting parties conceal a contract’s real character insofar as they call
it by a name or give it a shape intended not to express but to disguise its true nature
When a court is asked to adjudicate on any rights under a contract- it can only do so
by giving effect to what the transaction really is and not according to the shape it
purports to be
, The maxim plus valet quod agitur quam quod simulate concipitur applies in such a
case
o To denote that what the parties did (or intended) is more important than
what the parties seem to have done (or intended)
Court must examine the facts of each case in which the allegation of a simulated
contract is made to determine whether a real and ascertainable intention exists that
differs from the simulated intention devised by the contracting parties
Two permutations of the sham trust exist-
1. Possible that the founder did not intend to create a trust but instead intended to
create some other legal institution
Khabola v Ralitabo-
o Trust was ostensibly created ito a trust deed that described the applicant as
the donor and the other parties as the co-trustees
o Applicant conducted farming activities on the supposed trust properties
o Co-trustees were required to contribute financially to this venture
o No trust beneficiaries were appointed
o Court reasoned that the parties seemed to have intended the creation of a
partnership rather than a trust
o But simulated their arrangement to appear like a trust
2. Where the founder never intended to create any specific legal institution but only
used the name and/or form of a trust to gain some or other advantage that the law
does not otherwise bestow
B. The Alter ego trust
No functional separation and normally in family trusts
Trust that is validly created and exists as a trust but is open to abuse by its trustees or
beneficiaries
Niewoudt v Vrystaat Mielies (Edms) Bpk-
Emergence of a “newer type of trust”
Where a trust is created while everything else remains as before
Land and Agricultural Bank of SA v Parker-
Core idea of the trust is debased in this newer type of trust
Because the trust is employed to permit everything to remain as before
o And not to separate the beneficiaries’ enjoyment from the trustee’s control
2. THE EXPRESSION OF THE INTENTION IN A MODE SUITED TO CREATE AN OBLIGATION
The intention to create a trust must be expressed in a mode appropriate to create a legal
obligation
Contained in an inter vivos trust, testamentary trust or a court order
,The legal obligation imposed- depends on situation whether trustee has been appointed or
not
If the trust property has already been transferred to or placed under the control of a
duly appointed trustee- obligation is one that is imposed on that trustee to
administer the trust property in accordance with the trust instrument’s prescripts to
attain the trust object
If a trustee has not yet been appointed, has not yet assumed office or has not yet
been vested with either the ownership in the trust property or control over the trust
property
o The obligation is one that is imposed on the founder or another to enable the
trustee to administer that property
o Subject to the trust
A trust is validly created even if there is no trustee in office- a trust will not fail for the want
of a trustee
If a trust instrument determines that a specified minimum number of trustees must at all
times occupy the trustee office- and the number of trustees in office falls below the
minimum or trustee office becomes completely vacant-
Trust obligation does not fall away
Trust continues to exist
The necessity of the trust instrument imposing a trust obligation holds an important
implication for the creation of an inter vivos trust
The appointment of a trustee and a trustee’s acceptance of such appointment as well
as the trust obligation that accompanies it
Necessary for the creation of an inter vivos trust
3. A DEFINITION WITH REASONABLE CERTAINTY OF THE TRUST PROPERTY
Section 1-“trust property” or “property”
Movable or immovable property
And includes contingent interests in property
Which are to be administered or disposed of by a trustee in accordance with the
provisions of a trust instrument
Trust’s property must be identified with reasonable certainty in the trust instrument or must
be identifiable with reasonable certainty ito criteria set out in the trust instrument
Failure to identify a trust’s property with the requisite degree of certainty- invalidates
that trust
, 4. A DEFINITION WITH REASONABLE CERTAINTY OF THE TRUST OBJECT
Peterson v Claassen-
Court distinguished between a trust’s object and a trust’s purpose
Trust’s object-
o Usually stated clearly in the trust instrument
o All the parties dealing with a trust are regarded as having knowledge of the
trust’s object
Trust’s purpose-
o That which is sought to be achieved through the use of the trust regardless of
its stated object
If a trust instrument does not provide an adequate indication of the trust’s intended object-
no trust is created
If the founder intends a trust to attain an impersonal object-
Trust instrument must stipulate that object with sufficient certainty
5. LAWFULNESS OF THE TRUST OBJECT
Object of a trust must be lawful
Unlawful if it is illegal or contrary to public policy
Provisions that occasion unfair discrimination do not necessarily render the object of the
trust unlawful
REQUIREMENTS FOR TRUST ADMIN TO COMMENCE
Once the foregoing requirements have been met and a trust is created- 2 further
requirements must be satisfied for trust admin to commence
1. Presence of a duly appointed trustee who has accepted the appointment
2. Transfer of the trust property to the trustee or the trust beneficiary
1. A TRUSTEE
Presence of a trustee is not essential to the creation of a valid trust
But crucial for administering the trust
Trust administration commence only once a trustee is in office
If the trustee office is vacant or cannot be filled upon a trust’s creation-
The Master and the HC are empowered to appoint a trustee
In order to ensure the commencement of trust admin
Trustee’s failure to comply with the statutory duties and procedures does not prevent the
commencement of trust admin- but makes it difficult to continue
