Are the fees charged by testamentary trustees legislated?

What are the functions of trustees of testamentary trusts? Are the fees charged legislated? What constitutes a dereliction of duty?


I will start my answer by providing some background to trusts in general.

Trusts can generally be divided into two types – inter vivos trusts and testamentary trusts. An inter vivos trust comes into existence during the lifetime of the founder of the trust by agreement between the founder and the trustees. The agreement is to administer assets for the benefit of the beneficiaries determined in the trust deed. A testamentary trust, on the other hand, is set up in a person’s will and only comes into existence when the person passes away and effect is given to their will. The person’s will in this instance becomes the trust deed by which the trustees must administer the assets for the benefit of the appointed beneficiaries.

The functions and responsibilities of trustees in both types of trusts are the same. This is set out in both Common Law as well as the Trust Property Control Act No 57 of 1988. From a reading of the act, it is clear that the administration and governance of a trust is the responsibility of the trustees. The act requires a trustee to act with the care, diligence and skill that can reasonably be expected of a person who manages the affairs of another. This is called a fiduciary relationship.

The fiduciary relationship requires the trustee to act honestly and in good faith in relation to the trust, the beneficiaries and the other trustees, and to exercise the powers they may have in the interest of and for the benefit of the beneficiaries.

The trust deed, alongside the act, can also place specific duties on the trustees, and any failure to comply with these specific or fiduciary duties, or act in a negligent way, can lead to the trustees being sued and held liable for any damages caused by their actions.

Due to the onerous duties and responsibilities that a trustee takes on when accepting the appointment, they are entitled to charge a fee for their services.

The Trust Property Control Act permits a trustee to receive reasonable remuneration but does not contain any further provisions on trustee remuneration. As such, unless the trust deed determines how a trustee should be remunerated, it is left to the trustee to determine the reasonableness of their remuneration. This can obviously lead to lots of disputes, which will ultimately get settled by the Master of the High Court.

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