Page 30 - Bespoke EPG 2017 Digital

Divorce and assets in trust
■■ A 2006 Supreme Court case (Badenhorst vs. Badenhorst) highlights the fact

that if a trust is not correctly established and managed, it could be deemed
to be invalid, and in fact, not a trust at all.
■■ The case was between a husband and his ex-wife, and the Court held that
the trust assets were deemed to be owned by the husband in his personal
capacity, and he was consequently ordered to share same in an equitable
fashion with his ex-wife in their divorce proceedings.
■■ Some of the factors which contributed to the Judge’s ruling were that
the husband had listed the trust assets as his own personal assets in an
application for a credit facility and had insured in his own name a beach
cottage owned by the trust. In addition, he seldom consulted with the other
trustee (his brother) regarding the administration of the trust assets.

Important considerations re trusts:
■■ Most inter vivos trusts are set up for various purposes such as financial and

estate planning, reducing estate duty payable on death and / or protection of
assets against creditors.
■■ The estate planner needs to weigh these benefits against the practicalities of
losing ownership and control over assets transferred to a trust.
■■ If a trust does not have an independent trustee appointed, and, depending
on the way the deed is set out and the trust assets administered, these
“benefits” or protections may fall away.
■■ In order to prevent these serious consequences, a trustee should
acquaint himself with the trust deed and adhere actively to his duties and
responsibilities.

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