CAN A TRUST PROTECT YOUR ASSETS IN A DIVORCE?

​The principal understanding of a South African trust is that there must at all times be a separation of ownership or control of trust assets, from enjoyment of trust benefits.

This principle is reinforced by section 12 of the Trust Property Control Act, No. 11 of 2018 which states that “Trust property shall not form part of the personal estate of the trustee except in so far as he as the trust beneficiary is entitled to the trust property.”

These days trust forms are progressively abused particularly in family trusts and business trusts where trustees are also beneficiaries. On many occasions our courts had to deal with the principal of a separation of ownership and control of trust assets where the trust was nothing but the “alter ego” of a trustee or trust founder which justified a court “going behind” the trust form or “piercing the veil” of the trust.

One needs to distinguish between “sham” and “abuse” scenarios when it comes to the administration of trust assets.  Abuse happens because of lack of adherence to the main duties of a trustee, i.e. that:

  • a trustee must exercise an independent discretion;
  • a trustee must give effect to the trust deed;
  • a trustee must act with care, diligence, and skill in performing duties/exercising powers.

To succeed in a claim that trust assets be included in the estate of one of the parties to a marriage there needs to be evidence that such party controlled the trust and but for the trust would have acquired and owned the assets in his own name.

One will be able to argue that the value of trust assets may be added to a spouse’s accrual in appropriate cases:

  • Where trust was alter ego of spouse; and
  • (Ab)used to conceal true accrual.

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Author – Jessica Gooding

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