Trusts in South Africa are often misunderstood and mismanaged as if they were legal entities like companies, leading to joint liability for trustees. Family members commonly act as trustees, unlike in other countries where professional trustees, like attorneys, accountants, and financial advisers, predominantly manage trusts.

As such independent trustees, who are usually professionals, guide these family trustees who often lack expertise. Independent trustees not only need to declare their qualifications to the Master of the High Court, but also require professional indemnity (PI) insurance to protect against possible liabilities from their trustee duties.

However, independent trustees’ PI insurance might not cover trustee services, so it’s crucial that they review their policies to ensure they have the right coverage. PI insurance typically includes defence costs and compensation for negligence, but trustees should avoid double insurance to prevent claim repudiation.

It also remains imperative that the layman trustees obtain third-party advice and ensure these advisers are reputable and insured.

I invited trust expert Phia van der Spuy into the studio, to detail the most important factors which both professional and amateur trustees need to consider when using this vehicle for financial- and estate planning purposes.

Van der Spuy (pictured below) is a chartered cccountant with a Master’s degree in local and international tax, a registered fiduciary practitioner, chartered tax adviser, a trust and estate practitioner and the founder of Trusteeze – a company that digitised trust administration and accounting. She also holds a B.Com Honours degree in Industrial Psychology.