The founder creates a trust relationship embodied in the trust document in terms of which he gives the trustees of the trust the power to exercise control over the trust assets in accordance with the terms and conditions of the trust deed for the benefit of the beneficiaries.

A founder can be any of the following –

·                     a contractually capable natural person

·                     a juristic person

·                     a trustee of the trust, also a trustee of another trust

·                     a beneficiary

A beneficiary can be any of the following –

·                     a natural person, also unborn

·                     a juristic person

·                     a trustee of the trust, also a trustee of another trust

·                     the founder

The founder however cannot be the sole trustee and also a beneficiary. This is implied by the definition of “trust” in the Trust Property Control Act No 57 of 1988 which defines a trust as the arrangement through which ownership in property of one person is by virtue of a trust instrument made over or bequeathed to another person, the trustee or the beneficiaries.

A trust instrument provides for the bequeathal of the trust assets over to another person for control. One is not meant to use a trust instrument to transfer assets which were already in your control, to yourself in your capacity as trustee, for your own benefit as a beneficiary of the trust. This is a misuse of the spirit and purport of a trust vehicle.

The founder’s power to appointment trustees is usually exhausted once the trust is created. This ensures that the founder does not have the continuous power to appoint the trustees of the trust and effectively exercise control of the trust through the trustees.

Although the founder and the beneficiary should not be close enough that the founder is also the sole trustee and beneficiary, it is recommend that the founder and beneficiary are related within parameters. Problems arise with unrelated founders when considering exemptions from transfer duty in terms of section 9(4)(b)(ii) of the Transfer Duty Act No 40 of 1949 which requires the founder to be related to the beneficiaries in the 3rd degree of consanguinity and/or affinity to benefit from the exemption from transfer duty.

Section 9(4)(b)(ii) provides that no transfer duty will be payable where trust property is transferred to a relative in pursuance to the trust deed that was formed for the benefit of the relative.