WHAT IS A TRUST!?
Who can have a TRUST!?
TRUST PROPERTY CONTROL ACT, 2018
This is an Act that regulates trusts in Botswana. In particular, it regulates their creation, operation and administration. Prior to 2018, there was no statutory law regulating trusts in Botswana. However, they were registered in terms of Section 5(l) of the Deeds Registry Act and the Administration of Estates Act. Upon the commencement of the Trust Property Control Act (the Act). The promulgation of the Act was motivated by the mushrooming cases of money laundering ravaging the world.
WHAT IS A TRUST?
In terms of Section 2 of the Act, a trust is an arrangement through which ownership of trust property is passed to the trustee in whole or in part to be administered or disposed of in terms of the trust instrument for the benefit of the beneficiary. Therefore, a trust exists when the founder (the one who sets up the trust) hands over control of the trust property (assets) to the trustee (someone who will be in charge of administering and managing the trust property) for the benefit of the beneficiary.
TYPES OF TRUSTS
Various types of trusts exist and they include Inter Vivos/Living Trust, Testamentary Trust, Charitable Trust, Ownership Trust, Bewind Trust, Discretionary Trust, Vesting Trust, Family Trust and Business Trust.
ESSENTIALS OF A VALID TRUST
Intention to create a trust
The founder of a trust must have the intention to create a trust and such intention must be clear, unequivocal and it must be in such a manner that the trust creates obligations.
The Act defines a “Trust instrument” as a written agreement, testamentary writing, court order or notarial deed under which a trust is created. A document reducing in writing an oral agreement under which a trust was created is also a trust instrument according to Section 3. From this, it is implied that trusts have to be reduced into some form of writing to be recognised under the law in Botswana.
The trust property may include corporeal, incorporeal, movable or immovable property so long as such property can be defined with certainty and is a res in commercio (meaning that it is subject to private ownership).
Section 12 of the Trust Property Control Act requires trust property to be clearly indicated as such in accounts or records. If applicable, it must be registered, and kept registered, in a manner that clearly indicates that it is trust property.
Trust objects must be certain and clearly spelt-out and must also be lawful, and not contrary to public policy. This refers to the objective of the trust- why the trust is formed in the first place; the goals it seeks to achieve. The objects include estate planning, limit tax implications, protection of business interests, creditor protection, family asset management and for charitable reasons. There are however no guidelines in the Act on how to draft clauses on objects in a trust deed.
Trustee refers to persons who administer and manage the trust.
Discretion must largely be exercised in the interests of the trust. Like an agent, a trustee is a fiduciary.
Section 10 (2) elaborates that acting as a bonus paterfamilias entails that the trustee should: Know the terms of a trust; Act in accordance with the terms; Act honestly and in good faith; Hold or deal with property for the benefit of beneficiaries or further the purposes of the trust; Exercise the trustee’s powers for a proper purpose; Not to exercise powers directly or indirectly for the trustee’s own benefit; Consider regularly whether or not to exercise the powers conferred by the trust instrument amongst others.
Section 10 (3) underscores any provision in a trust instrument that purports to exempt a trustee from or indemnify him/ her against liability for breach of trust or for failure to act with care, diligence and skill as required, shall be void.
Except where the trustee is also a beneficiary of the trust, the trust property does not form part of his/her personal estate as provided for in Section 13 of the Act. Therefore, he/she is required to keep a separate trust account in which he/she shall deposit money he/she received in their capacity as trustee as provided for in terms of Section 11.
Section 24 states that a trustee shall be entitled to such remuneration as provided for in the trust instrument. Where the instrument makes no provision, he/ she shall be entitled to a reasonable remuneration, which in the event of dispute shall be determined by the Master.
The Act, in terms of Section 21 provides for ways in which a trustee may be removed by the Master. These are: Conviction of any offence which dishonesty is an element; Being sentenced to imprisonment without the option of a fine; failure to give security upon request by the Master; If he/she is declared insolvent; If he/she is declared mentally ill; Failure to perform the duties of a trustee; or fails to comply with the requests of the Master.
The office of trusteeship may also terminate by way of resignation, death or termination of the trust.
A trust for purposes of effecting a donation may fail if beneficiaries are not indicated or a mechanism provided for their identification. Almost everyone, including persons with limited capacity, qualifies for designation as a beneficiary. Apart from identification of beneficiaries, the trust document must specify their rights and entitlements.
According to Sections 8 and 23 beneficiaries have a right to be consulted in the replacement of trustees where this is not provided for in the trust instrument.
OTHER NOTABLE PROVISIONS
The Role of the Master of the High Court
The Master of the High Court is given substantial powers under the Act. In particular, the Act installs the Master of the High Court of Botswana as the Registrar of trust instruments, and as a supervisor or regulator of trustees charged with administration of trusts in Botswana. The Act at Section 4 requires the Master to keep a register of trustees and trust instruments, which shall be open to inspection by the public, upon payment of a fee. Sections 5-7 require trustees whose appointment comes into effect to notify the Master, lodge the trust instrument, provide security, and obtain authorisation to act as a trustee. The Act makes it a criminal offence for a trustee to commence to operate in Botswana without registering with the Master and seeking his or her authorization according to Section 27.
Variation / Termination of a Trust
Under Section 14 of the Trust Property Control Act, a court may also vary a trust instrument upon application by the trustee or any person with a sufficient interest in the trust property.
A court may do so if satisfied that a provision in the instrument brings about consequences the founder did not contemplate or foresee, and which hamper: (a) Achievement of founder’s objectives; (b) prejudice the interests of the beneficiaries; or (c ) is in conflict with the public interest.
Some of the important documents that should be submitted for a trust to be registered are an Application form; Acceptance of trusteeship form; Trust Instrument; Proof of payment; ID(s) of the trustee(s); Beneficiaries’ IDs and declaration forms; Bond security; Exemption of payment of bond security certificate where necessary; A court order where a trustee is appointed by the court.