AUTHOR: GRAEME PALMER
For almost 40 years, trusts in South Africa have been regulated by the Trust Property Control Act,1988. During that time, trusts have become a popular vehicle for estate planning, asset protection, business succession and the management of family wealth. But the world has changed significantly since 1988, and lawmakers believe the rules governing trusts need to change too.
The Draft Regulation of Trusts Bill, 2026 proposes a complete overhaul of the current law. Rather than simply amending the existing Act, it repeals it entirely and replaces it with a modern, far more detailed system of trust regulation.
So, what will this mean in practice for ordinary trustees and beneficiaries?
Trusts Will Face More Oversight
One of the biggest themes running through the new Bill is greater accountability.
Under the current law, many trusts interact with the Master’s Office only when they are first established or when changes to trustees are made. The new Bill would require much more ongoing engagement with the Master. Trustees will have to keep detailed records, submit annual returns and, in many cases, prepare annual financial statements.
In simple terms, trusts will no longer be viewed as structures that can be established and then largely left unattended. The draft law expects active administration and ongoing compliance.
Clearer Rules for Creating Trusts
The current Act contains little guidance on what is required to create a valid trust, leaving much of the law to court decisions over the years. The new Bill changes this by expressly setting out the requirements for a valid trust.
A trust will need:
- A clear intention to create a trust.
- Clearly identified trust assets.
- Clearly identified beneficiaries or a lawful purpose.
- Properly appointed trustees.
Importantly, the Bill provides that a sole trustee cannot also be the sole beneficiary. If these requirements are not met, a court may declare the trust invalid.
This should provide greater certainty and reduce disputes about whether a trust actually exists in law.
Family Trusts Under the Spotlight
For many years, courts have expressed concern that some family trusts are treated as personal extensions of the founder, rather than genuinely independent legal arrangements.
The new Bill seeks to address this concern. It allows the Master to appoint an independent trustee where all trustees are related to one another, all are beneficiaries, and the trust conducts business with third parties.
The objective is to ensure that trust property is genuinely managed in the interests of beneficiaries and not merely controlled by one family without independent oversight.
More Transparency About Who Really Controls a Trust
Recent amendments to trust legislation already introduced beneficial ownership reporting. The new Bill goes much further. Trustees will be required to establish and maintain detailed records of the individuals who ultimately own, benefit from or control a trust. Changes to those records must be reported within strict time limits.
This is part of South Africa’s broader efforts to combat money laundering, tax evasion and the misuse of trusts to conceal assets.
For legitimate family trusts, the practical effect will be increased paperwork and reporting obligations.
Trustees Will Be Expected to Act More Professionally
The existing Act requires trustees to exercise care, diligence and skill. The new Bill keeps this principle but modernises it by recognising that some trustees possess specialised knowledge or professional expertise. For example, an accountant, attorney or professional fiduciary practitioner acting as a trustee may be held to a higher standard than someone with no specialist experience.
The message is clear; trustees are not merely figureheads. They are expected to actively oversee trust affairs and make informed decisions.
Annual Financial Statements and Annual Returns
Many trust administrators will regard this as one of the most significant changes.
The Bill requires trusts to prepare annual financial statements, subject to limited exemptions for smaller trusts that fall below prescribed thresholds. In addition, every trust will have to submit annual returns to the Master’s Office.
For some trusts, particularly dormant family trusts with little activity, this will create new administrative obligations and costs. However, proponents argue that it will improve governance and assist the Master in identifying non-compliant trusts.
Stronger Enforcement Powers
Currently, the Master has relatively limited mechanisms for dealing with non-compliance. The new Bill introduces a system of compliance notices and administrative fines. Trustees who fail to meet their obligations may first receive a notice requiring corrective action. If they fail to comply, the Master may impose financial penalties. This gives regulators an enforcement option short of expensive court proceedings and is likely to encourage greater compliance.
Severe Penalties for Serious Non-Compliance
The proposed legislation introduces several new offences and significantly strengthens sanctions.
Trustees may face penalties for:
- Acting without proper authority.
- Failing to maintain trust records.
- Providing incorrect beneficial ownership information.
- Failing to use properly designated trust accounts.
- Breaching specified reporting obligations.
Some offences may attract fines of up to R10 million, imprisonment for up to five years, or both.
The introduction of personal liability and substantial penalties demonstrates the government’s intention to treat trust compliance seriously.
Better Protection for Vulnerable Beneficiaries
The Bill also introduces safeguards for trusts established to hold court-awarded damages for children and vulnerable individuals. Courts will be required to consider whether the trust structure is genuinely in the beneficiary’s interests and whether trustee remuneration is reasonable. This provision aims to prevent vulnerable beneficiaries from being disadvantaged by poorly structured trusts or excessive trustee fees.
What Does This Mean for Existing Trusts?
If the Bill becomes law, existing trusts will not disappear. However, trustees will need to review their trust administration practices carefully. They may need to:
- Update their trust deed and trust records.
- Ensure beneficial ownership registers are in place.
- Prepare annual financial statements where required.
- File annual returns.
- Review trustee appointments and governance arrangements.
For many trusts, compliance will become more formal and more demanding than under the current system.
A Shift from Trust Privacy to Trust Accountability
The proposed Regulation of Trusts Bill represents a major change in philosophy. The 1988 Act was primarily concerned with protecting trust property and giving the Master supervisory powers. The new Bill focuses on transparency, accountability and ongoing regulation.
For beneficiaries, these reforms should provide greater protection. For regulators, they offer stronger tools to combat abuse. For trustees, they signal the end of informal administration and the beginning of a much more regulated environment.
Whether welcomed or criticised, the proposed Bill is likely to be remembered as the most significant reform of South African trust law since the introduction of the Trust Property Control Act nearly four decades ago.
Tel: +27 31 570 5496
Email: graeme.palmer@gb.co.za