By Lilian Mongwe, Trainee Tax Consultant and Mbuyisile Nukeri, Trainee Tax Consultant
Many trustees assume that a trust remains compliant simply because its tax returns have been submitted and its beneficial ownership information has been filed. However, increasing demands for transparency, accountability and regulatory oversight are reshaping South Africa’s trust law framework.
For nearly four decades, South African trusts have been regulated under the Trust Property Control Act, 1988 (“the Act”). On 7 August 2026, the Draft Regulation of Trusts Bill, 2026 (“the Bill”) was published for public comment. If enacted in its current form, the Bill will repeal and replace the current Act and introduce a substantially more detailed framework for the creation, governance and administration of trusts.
Trustees Can No Longer Afford to Be Passive
Many individuals accept trusteeship appointments without fully appreciating the legal responsibilities associated with the role. A trustee is not merely a signatory to resolutions or a nominal office bearer. Trustees occupy a fiduciary position and must exercise their powers honestly, independently and in the best interests of the beneficiaries.
The current Act already imposes material duties on trustees. A trustee may act only once authorised in writing by the Master of the High Court (“the Master”). Trustees must exercise the care, diligence and skill reasonably expected of a person managing another person’s affairs. They must also keep trust property separate and identifiable, operate a separate trust account, maintain beneficial ownership information and account to the Master when requested.
The Bill builds on these existing obligations by introducing more detailed requirements relating to financial reporting, annual returns, beneficial ownership, trust records and amendments to trust instruments. The central message is clear: trustees can no longer afford to take a passive approach to trust administration.
Beneficial Ownership Requires Active Maintenance
The current Act already requires trustees to establish, record and lodge prescribed beneficial ownership information with the Master and to keep that information updated. The Bill would impose clearer timeframes and reinforce the need for ongoing monitoring.
Under the proposed legislation, trustees would be required to update the trust’s internal beneficial ownership records within ten days after a change and lodge the updated information with the Master within the same period. The proposed definition of “beneficial owner” would expressly include an identifiable beneficiary, even where that beneficiary is not named individually in the trust instrument.
This is particularly relevant to trusts with discretionary beneficiary classes, corporate beneficiaries, foreign participants or layered ownership arrangements. Beneficial ownership is no longer a once-off compliance exercise. Trustees will need processes capable of identifying changes and ensuring that both the trust’s internal records and the information lodged with the Master remain accurate.
Changes to Trust Deed Amendments
The Bill proposes stricter requirements for trust deed amendments. Trustees would first be required to ensure that the trust’s beneficial ownership information is up to date. The amendment would then need to be lodged with the Master, and trustees could not exercise powers or perform duties arising from the amendment until the Master has acknowledged its lodgement.
An action taken prematurely could be invalid and a trustee could be held personally liable for direct or indirect loss suffered by the trust as a result. This may affect distributions, changes to beneficiary classes, amendments to trustee powers and restructuring transactions implemented under an amended trust instrument. In other words, signing the amendment is no longer the final step.
Independent Trustees as a Governance Safeguard
The Bill would empower the Master to appoint an independent trustee in defined circumstances. This power would arise where all the trustees are beneficiaries, all the trustees are related to one another, and the trust conducts business or trading activities with third parties that create obligations to those parties.
The independent trustee would be required to have no personal interest in the trust property and to be capable of exercising independent judgement. The proposal does not create a general requirement for every family trust to appoint an independent trustee. It does, however, recognise the governance risk that arises where control of the trust and enjoyment of its benefits are concentrated within the same family group.
Trustees must be capable of making decisions that advance the proper interests of the trust rather than the personal interests of a founder, beneficiary or dominant family member. Trusts that conduct business or participate in commercial structures should assess whether their current governance arrangements support genuinely independent decision-making.
The Risk of Personal Liability Remains Real
The Bill would also formalise the resignation process. A trustee would be required to notify the Master, the remaining trustees and known beneficiaries with vested rights. Importantly, the resignation would become effective only once the trustee receives written acknowledgement from the Master.
Sending a resignation notice would therefore not, by itself, immediately terminate the appointment. The Bill also expressly provides that a former trustee may remain liable for a failure to discharge fiduciary duties during the period in which that person acted as trustee.
Trustees considering resignation should therefore ensure that the trust’s records are complete, outstanding matters have been properly handed over and the Master’s written acknowledgement has been received.
Enforcement Becomes Personal
The Bill proposes an enforcement model extending beyond criminal prosecution. The Master could issue a compliance notice for specified failures relating to matters such as trustee contact details, annual financial statements, annual returns and beneficial ownership information. Continued non-compliance could result in an administrative fine payable personally by the trustee. The trustee would not be entitled to recover that amount from trust property.
Certain contraventions could also attract criminal consequences. These include acting without the required authority, failing to maintain prescribed trust records and intentionally recording or lodging incorrect beneficial ownership information. Depending on the offence, the Bill provides for a fine, imprisonment for up to five years, or both. Certain offences may attract a fine of up to R10 million.
Individuals who have accepted trusteeship simply because they are family members may need to reconsider whether they have the knowledge, independence and capacity required to fulfil the role properly.
What Should Trustees Do Now?
Although the closing date for public comments is 11 September 2026, trustees should use this period to assess whether their trusts are governed and administered in accordance with existing law and evolving regulatory expectations.
The trust’s letters of authority, trust instrument, amendments, resolutions, asset records, financial statements, tax filings and beneficial ownership information should be reviewed for completeness and internal consistency. Decision-making processes should also be tested against the trust instrument, particularly where trustees are related, trustees are also beneficiaries, or the trust participates in operating companies, cross-border structures or transactions with third parties.
Addressing governance gaps early is invariably easier than reconstructing a trust’s affairs after a regulatory enquiry, tax verification, banking review or proposed restructuring exposes deficiencies.
A More Regulated Trust Environment
South Africa is entering a more closely regulated trust environment characterised by enhanced transparency, formal reporting obligations and increased accountability for trustees.
While the Bill remains in draft form, it provides a valuable opportunity for trustees to assess whether their governance frameworks, record-keeping and decision-making processes are fit for a more regulated environment.
For assistance in evaluating the governance, compliance or structuring implications for a trust, visit Arro or contact Lauren Hart at lauren@arro.co.za.
