Trusts have historically been a useful tool in estate planning for family succession and creditor protection purposes. Sars has long been suspicious of trusts, given the potential for abuse and has increasingly reduced the tax benefits available for trust planning. Now, new legislation has been proposed which will significantly increase the regulatory burden on trustees, making it necessary for those involved with trusts to consider carefully their responsibilities and compliance obligations.
The Department of Justice has published for comment the Regulation of Trusts Bill, 2026, which is intended to repeal and replace the Trust Property Control Act, 1988. While the current Act has regulated trusts for nearly four decades, the Bill introduces a significantly more comprehensive regulatory framework aimed at increasing transparency, combatting money laundering and improving accountability in trust administration.
For individuals and families who use trusts for estate planning, asset protection, business succession and investment holding purposes, the proposed legislation will usher in a number of important changes.
The current Act has been concerned primarily with the Master's supervision of trustees and the administration of trust property. By contrast, the Bill establishes an extensive compliance regime which regulates ongoing reporting and governance obligations on trustees.
The result is that trusts will increasingly be regulated in a manner similar to companies, requiring regular reporting, record-keeping and disclosure of ownership and control structures. This article is a high-level overview of the most significant developments.
Requirements to form a Trust
One of the most significant innovations is that the Bill expressly sets out the legal requirements for the creation of a trust. A valid trust will require: (1) a clear intention to create a trust; (2) identifiable trust property; (3) identifiable beneficiaries or trust objects; (4) the appointment of trustees; (5) a lawful purpose; and (6) separation between control and enjoyment (meaning that a sole trustee may not also be the sole beneficiary).
Although these principles already exist in South African trust law through case law, the Bill now gives them statutory force. This may make it easier for creditors, especially SARS, to challenge improperly structured and/or inadequately administered trusts.
Many South African family trusts are administered by family members who are also beneficiaries. The Bill grants the Master greater authority to intervene where trust structures blur the distinction between ownership and control.
The current Act does not require an independent trustee; however following the case of Land and Agricultural Bank of SA v Parker and another, the Chief Master issued a directive in 2017 that required that all trusts registered for the first time and which are considered ‘family business trusts’ (wherein the trustees are all beneficiaries and the beneficiaries are all related to one another) to appoint an independent trustee.
In the Bill the Master is empowered to appoint an independent trustee to any trust, despite any provision in the trust instrument to the contrary, if the Master, after consultation with the trustees and beneficiaries with a vested right in the trust property, considers this to be appropriate. This development is likely to affect family business trusts registered prior to the Chief Master’s directive of 2017.
Annual financial statements and filling of returns
Under the current Act there is no obligation requiring annual financial statements for all trusts. The Bill changes this position significantly. Trusts will be required to prepare annual financial statements every year unless they fall below thresholds to be prescribed by the Minister.
For many dormant or low-activity trusts this may create additional accounting costs and administrative burdens. Trustees will need to ensure that proper books and records are maintained throughout the year.
Another major change is the introduction of a compulsory annual return filing system. Every trust will be required to submit prescribed information to the Master and pay the prescribed filing fee.
This requirement is similar to the annual return obligations imposed on companies by the CIPC and will create an ongoing compliance burden for trustees.
Compliance and regulatory obligations
Following South Africa's efforts to improve compliance with international anti-money laundering standards, the current Act was amended in 2022 to introduce beneficial ownership disclosure requirements. The Bill goes much further, both in a long, convoluted definition of who qualifies as a ‘beneficial owner’ and how the trustees are to deal with such information. Trustees will be required to establish and record beneficial ownership; maintain detailed beneficial ownership registers; lodge beneficial ownership information with the Master; update records within ten days of any change; and retain information for prescribed periods after termination of the trust. For trusts with changing beneficiaries, trustees or corporate structures, compliance will require ongoing monitoring and administration.
The Bill introduces detailed requirements regarding records that trustees must retain. Trustees will need to maintain files containing trust deeds, amendments, resolutions, contracts, financial statements, asset registers, liability records and documentation relating to trustee appointments and removals.
For professionally administered trusts this may not be a major change. However, many family trusts that operate informally will need to adopt more corporate-style governance procedures.
New enforcement regime
Perhaps the most dramatic difference is the enhanced enforcement regime. Under the current Act, the Master's ability to enforce compliance is relatively limited and generally requires court intervention. The Bill empowers the Master to issue compliance notices, impose administrative fines and recover unpaid fines through civil judgment procedures.
The Bill also creates a number of criminal offences. Trustees who fail to comply with obligations relating to trust accounts, beneficial ownership information, record keeping or authorisation requirements may face fines of up to R10 million, imprisonment of up to five years, or both.
Steps trustees can take to prepare
Although the Bill is only a proposed law and has not yet been enacted, trust founders and trustees should begin evaluating whether their trusts are adequately administered. In particular, trustees should take the following steps: review trust deeds; ensure trustee resolutions are up to date; verify beneficial ownership records; maintain proper financial records; consider whether an independent trustee may be advisable; regularise any dormant or non-compliant trusts.
The Bill represents the most significant reform of South African trust law since 1988. While trusts will remain valuable estate planning and asset-holding vehicles, trustees will face substantially greater compliance, reporting and governance obligations. Those who prepare proactively for the new regime will be better positioned to manage risk, avoid penalties and ensure that their trusts continue to fulfil their intended purpose.
