The Regulation of Trusts Bill, 2026: An Overhaul of South African Trust Law

Key Shifts: 1988 Act vs. Regulation of Trusts Bill, 2026

1. Creation and Essential Validity of Trusts

Chapter 2 places the essential requirements for a valid trust onto an explicit statutory footing. Under Section 4(1), a founder must indicate with reasonable certainty the intention to create a trust, clearly identify trust property, designate identified or identifiable beneficiaries (or a lawful object), and appoint or provide for the appointment of a trustee.

• Sole Trustee / Sole Beneficiary Ban: Section 4(3) stipulates that a sole trustee may not be the sole beneficiary of a trust. If a court finds non-compliance, it is mandated under Section 4(4) to declare the trust invalid from inception or from the date non-compliance commenced.
• Litigation Damages Ring-Fencing: Section 3(1) prohibits establishing trusts to protect damages awards (such as Road Accident Fund or medical negligence payouts) for children or persons incapable of managing their affairs, unless a curator ad litem specifically recommends it, the court reviews the draft instrument, and trustee fees are strictly vetted.
• Exclusion of State Community Property: Section 3(2) bars trusts under this Act from administering property received by communities from the State under statutory or agreement-based land reform programmes.

2. Independent Trustees and the Master's Expanded Powers

The Master of the High Court shifts from an administrative archive to an active supervisory authority with extensive investigatory powers.

• Statutory Independent Trustee Requirement: Under Section 10(4), the Master may appoint an independent trustee - regardless of contrary terms in the trust deed - if all trustees are beneficiaries, all trustees are related to one another, and the trust conducts business or commercial trading with third parties. An independent trustee must be unrelated, hold no beneficial interest in trust assets, and exercise independent oversight (s 1).
• Corporate Trustees: Juristic persons appointed as trustees must act through a named natural person authorised on the Master's Letter of Authority (s 8(6)).
• Forensic Inquiries: Under Section 12, the Master may compel trustees to account under oath and appoint external investigators. If a trustee fails in their fiduciary duty, the Master can order them to settle the costs of the inquiry personally. Where criminal conduct is suspected, the investigator must report directly to the Commercial Branch of the South African Police Service (SAPS) (s 12(7)).

3. Trustee Duties: The Prudent Investor Rule & Void Indemnities

Chapter 4 raises the performance bar for all trustees:

• Standard of Care: Trustees must act with the care, diligence, and skill reasonably expected of a person managing another's affairs (s 15(1)). Professional trustees (attorneys, chartered accountants, trust companies) are held to a heightened standard reflecting their professional claims.
• Exemption and Indemnity Clauses Rendered Void: Section 15(2) invalidates any clause in a trust instrument that purports to indemnify or exempt a trustee from liability for breach of trust where they failed to exhibit the requisite statutory care, diligence, and skill.
• Prudent Investor Codification: Section 16 enacts a modern prudent investor standard. Trustees must consider 15 statutory factors, including portfolio diversification, inflation risk, liquidity, tax implications, and the capital needs of beneficiaries.
• Asset Separation: Section 18 mandates a separate trust account in the name of the trust at a registered bank, while Section 19 requires trust property to be registered and recorded clearly to prevent commingling with personal estates.

4. Annual Returns, Financial Statements, and Beneficial Ownership

Administrative governance for South African trusts will now closely mirror corporate standards:

• Annual Financial Statements (AFS): Section 20 requires trustees to prepare annual financial statements every year. For existing trusts not currently producing AFS, the first set must be finalized within six months of the Act's commencement.
• Mandatory Annual Return: Under Section 21, every trust must file an annual return and pay a fee within six months of the anniversary of the first trustee's authorisation. Existing trusts must file their initial return within six months of the Act coming into effect.
• 10-Day Beneficial Ownership Lodgement: Section 23 requires trustees to keep records of beneficial owners - expanding to identifiable beneficiaries, natural persons controlling juristic entities, and discretionary beneficiaries. Any change in beneficial ownership information must be updated and lodged with the Master within 10 days.
• Five-Year Document Retention: Trustees must retain trust instruments, resolutions, contracts, financial statements, and asset records throughout their appointment and for a minimum of five years after resigning or vacating office (s 22).

5. Resignation and Master's Removal Powers

Trustees cannot simply step down at will:

• Conditional Resignation: Under Section 25(4), a resignation is legally effective only once the trustee receives a written acknowledgement of receipt from the Master. Resigning trustees remain accountable for breaches committed during their tenure (s 25(7)).
• Direct Removal by the Master: Section 26 empowers the Master to remove a trustee directly without an initial court application if the trustee is disqualified under Section 9, fails to provide security within two months, enters debt review, or is placed under liquidation, business rescue, or personal sequestration.
• Disqualification Register: Section 9 establishes a public register of disqualified trustees, covering persons removed for dishonesty, delinquent directors, unrehabilitated insolvents, and those removed for beneficial ownership non-compliance.

6. Enforcement, Administrative Fines, and Criminal Offences

Chapter 7 introduces a multi-tiered enforcement regime that holds trustees directly accountable:

Immediate Action Steps for Trustees and Founders

1. Audit the Trust Instrument: Review trust deeds to identify invalid indemnity clauses, sole-beneficiary-sole-trustee structures, and outdated resignation procedures.
2. Assess Independent Trustee Requirements: If the trust runs trading activities or business contracts while all trustees are related family beneficiaries, plan for the appointment of an accredited independent trustee.
3. Reconstruct Accounting Records & Minute Books: Collate historical resolutions, asset transfer documents, and banking mandates to ensure full compliance with the 5-year record retention rule.
4. Prepare for Annual Filings: Align financial reporting dates to meet the six-month deadline for preparing financial statements and lodging the annual return with the Master.