Article by Sulize Möller, Director
THE use of a trust has long been favoured as an asset management vehicle due to the great variety it provides in its structuring and operation, the tax benefits it holds as well as a multitude of other benefits derived from the use thereof.
Suppose, however, that the trust has run its course or its intended purpose has been fulfilled. It is no longer needed, cannot serve its original purpose, is dormant or just no longer beneficial. What now?
The Trust Property Control Act, 55 of 1988 does not specifically deal with the deregistration of trusts. Reason being that this is deemed to be an administrative internal affair which must be dealt with by the Trustees. The Trustees can, thankfully, obtain guidance from the common law and, equally important, the trust deed on the matter of deregistration whilst also complying with the procedural requirements of the Master’s office.
The common law of South Africa lays out several instances when a trust can be deregistered, namely when deregistration is legislated by statute, where the object of the trust has been fulfilled (i.e. children who are beneficiaries of the trust have attained the determined appropriate age), there are no beneficiaries left of the trust, the beneficiaries have renunciated or repudiated their claim to trust assets, the trust property is destroyed and / or by operation of a resolutive condition in the trust deed.
In most instances, the same trust deed that sets out the purpose and governance of the trust, will also stipulate if, when and how the trust can be deregistered. For most discretionary trusts, this can be done at the discretion of the Trustees by resolution signed by all the said Trustees.
If the Master of the High Court of South Africa, where the trust was first registered, is satisfied that grounds exist for the deregistration of the trust, they will proceed with the necessary upon receipt of the following:
- Original Letter of Authority or (if the original is lost) then a declaration by the Trustees to the effect that the Letter of Authority is so lost and despite a diligent search could not be found. The declaration must be lodged with a copy of the Letters of Authority where possible;
- Bank statement showing a nil balance or letter from the bank confirming that the account of the trust is inactive or has been closed;
- Confirmation from the trust accountant / auditor that the beneficiaries have received all benefits due to them and that the trust no longer owns any further assets;
- A resolution of the Trustees confirming the decision to deregister the trust and the reason therefore; and
- In some instances, the Master may call for the last annual financial statements of the trust.
It is worthwhile to note that where immovable assets (i.e. property) need to be transferred to (registered in the name of) the beneficiaries, this transfer will be exempt from payment of transfer duty to SARS.
Once the Master is satisfied that all conditions have been met, he/she will:
- Confirm that the trust file has been closed;
- Instruct the Trustees to comply with Section 17 of the Trust Property Control Act, 55 of 1988 (Trustees are obliged to keep all trust records and may not discard or destroy any documents without the Master’s consent, including all financial records and any documents that serve as proof of the investment, safe keeping, control over, administration of, alienation of, or distribution of trust property for a period of 5 years from date of deregistration); and
- The Master will also provide a letter to SARS confirming that the trust can be deregistered as a tax payer. It is advisable that the trust accountant / auditor follows up same with SARS.
Do you have questions about the process of deregistration of trust or need assistance transferring immovable assets to the beneficiaries? Contact our office to arrange a consultation with one of our experienced conveyancers on 035 792 2011.