There is often great uncertainty and misconceptions when it comes to the resignation of trustees of a trust. In this article, we look at the requirements for the resignation of a trustee from an inter vivos trust and a testamentary trust.
Section 21 of the Trust Property Control Act 57 of 1988 (“the Act”) allows trustees to resign at any time provided that written notice is given to the Master of the High Court as well as to ascertained beneficiaries with legal capacity. It is important to note that a failure to inform the identifiable beneficiaries may result in the resignation being regarded as invalid. Although notifying co-trustees is not a requirement under the Act, it is considered good practice.
Section 21 of the Act applies to both inter vivos trusts and testamentary trusts. As a trustee of either type of trust, you could resign if the necessary processes outlined in the Act are followed and complied with. However, the resignation process does not take immediate effect upon submitting the resignation documentation to the Master of the High Court. The resigning trustee may remain accountable as trustee of the trust until the Master of the High Court issues a new Letter of Authority for the trust. Such continuity of accountability is crucial during this transitional period, ensuring a smooth handover of responsibilities.
Common misconceptions suggest that a trustee can only resign with the consent of other parties involved in the trust or those mentioned in the trust deed. In the 2012 case of Meijer NO and another v Firstrand Bank Limited…, the Court ruled that the entitlement to resign is not subject to the Master’s or the Court’s permission. Therefore, a trustee has the right to resign at their discretion. Nonetheless, a resigning trustee needs to adhere to the correct procedures to ensure a proper and effective resignation process.
Inter Vivos Trusts
There are slight variations in the resignation process for trustees of inter vivos trusts compared to testamentary trusts. Understanding these differences is vital for trustees to fulfil their fiduciary responsibilities effectively. Trustees should carefully consider the trust deed’s contents, any amendments, and/or the will.
Inter vivos trusts are primarily regulated by the Act and the relevant trust deed. The resignation process begins with reviewing the trust deed to identify any specific provisions. While a trustee can resign regardless of the trust deed’s stance, they must follow section 21. If the deed limits the number of trustees, a successor must be appointed when one resigns.
Testamentary Trusts
Testamentary trusts are governed by the Estate Duty Act, the Wills Act, and the Trust Property Control Act. The resignation process requires reviewing both the will and the trust deed. In some instances, especially where disputes arise, court approval may be necessary. The outgoing trustee must still inform beneficiaries, co-trustees, and the executor, and appoint a successor.
The resignation must be formally executed in writing and detail the effective date and successor trustee information. Transparent communication and smooth transitions are essential for effective trust administration.
In summary, while minor differences exist between the procedures for inter vivos and testamentary trusts, resignation is permitted in both cases. Trustees must understand the legal and fiduciary requirements, and estate planners should consider including a resignation clause in the trust deed or will.
If you require professional advice in this regard, do not hesitate to contact our offices.