This article deals with how a Trust can end and what happens to the assets of the Trust when it ends.
Trusts can be valuable estate planning tools for many South Africans. There are many reasons to establish a trust (some of which can be found if you peruse our Articles here), however, a question not too often asked is, “What happens when a trust ends?”
Trusts work by holding assets rather than those assets being in your personal name (trusts acquire assets in different ways but we will not deal with that in this Article). The Founder of the trust will lay the foundation for how the trust is to administer these assets, including appointing the first trustees. Often, all the assets of a trust will disburse over time (e.g. through payments to the beneficiaries when their reach a certain age or by funding the education of the beneficiaries); importantly, under South African Law, a trust is expected to eventually come to an end and to have a determinable end date.
How do trusts end?
In general, a trust will ends either by fulfilment of the object of the trust; failure of the beneficiary; renunciation or repudiation by the beneficiary; destruction of the trust property; or the operation of a resolutive condition.
Trusts that end without any assets
If a trust ends with all the assets of the trust having been used (i.e the trust is empty), the trust will terminate and the Master of the High Court may “de-register” a trust.
The “de-registration” of a trust is an internal administrative action by the Master’s Office to facilitate effective management of trust files.
Further, the South African Revenue Services (“SARS”) must be notified and all tax-related obligations must be dealt with.
Trusts that end with assets
It is also possible for the trust to end and still be holding assets. Examples would be if a “resolutive condition” of the trust required the trust terminates when a beneficiary reaches the age of 25, gets married, finishes University, etc..
If the Founder of the Trust is still alive, he/she may transfer the assets back into his/her name; the Founder (and descendants up to the third generation) will not pay Transfer Duty.
If the Founder is deceased, and there is no instruction by the Founder regarding distribution upon termination of the trust, the assets of the trust will need to be distributed to the beneficiaries of the trust according to their interests in terms of the trust deed and as determined by the trustees.
This can lead to disputes between the parties and it may become necessary to approach a Court to finalise the matter.
Assets distributed to a beneficiary as a result of terminating the Trust will become the property of that beneficiary and, as a consequence, that beneficiary will acquire all rights AND duties in respect of that asset.
Thereafter, SARS must be notified and the trust may be “deregistered” by the Master of the High Court.
DISCLAIMER: THERE ARE MORE CONSIDERATIONS THAN WE CAN COVER IN THIS ARTICLE SO ONLY USE THIS INFORMATION AS A GUIDE. THIS INFORMATION DOES NOT CONSTITUTE LEGAL ADVICE. IT IS ALWAYS BEST TO DISCUSS YOUR SITUATION WITH AN ATTORNEY; CONTACT US AT 0861 88 88 35; email@example.com AND THROUGH THE CONTACT FORM ON THIS PAGE.
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