The most common trust compliance pitfalls are poorly drafted trust deeds and inadequate record-keeping of trust documentation. Trustees’ failure to maintain proper records of resolutions or minutes clearly recording details of when, why and where the decisions were made and approved by the trustees of the trust has resulted in trusts being placed under a microscope for poor administration and non-compliance. Trustees should be aware that all decisions taken on behalf of a trust must be formally documented in a resolution and minutes and approved by the trustees. 

A regular review of the trust deed, the trustees and the beneficiaries of the trust is a crucial element in ensuring the trust’s compliance. Poorly drafted trust deeds can limit the trustees’ powers, with tragic and unnecessary long-term consequences for the beneficiaries of the trust. Failure to ensure compliance across all areas relating to the trust may turn the trust from a protective asset vehicle into a disastrous liability trap.

 Over the past 2 years, SARS has stepped up efforts to ensure trust compliance and challenge non-compliant trusts. Their systems now use artificial intelligence to detect backdated resolutions and cross-check information with the Master, as well as to verify whether trusts have filed their tax returns. These measures apply to all South African trusts, whether dormant or active. SARS has warned trustees that failure to comply with trust tax return submissions will result in penalties being implemented in early 2026.

Some trustees choose not to open a bank account for the trust, arguing that the trust is dormant. However, section 10 of the Trust Property Control Act 57 of 1988 states that whenever a person receives money in his capacity as trustee, he shall deposit such money in a separate trust account at a banking institution or building society. This is a mandatory requirement, not a matter of discretion. As part of the trust tax returns, all trusts must register for income tax to file their tax returns, which are linked to the trust’s = bank account. Trusts can no longer continue to operate without a bank account.

Appointing a trustee who is a friend or family member may cause problems when dealing with the trust administration. All trustees must actively participate in the day-to-day administration and decisions made on behalf of the trust. Having an independent trustee on your trust ensures that the trust is administered in terms of legislation and regulations and prevents any problems with objectivity in reaching decisions or having the trust declared an alter ego trust.

The most effective way to make sure your trust is compliant and avoid administrative shortcomings is to seek guidance from specialised professionals, such as trust advisors and administrators, to guide you through every step. If you are uncertain whether your trust is fully compliant in terms of the requirements of the Master and SARS, our Trust Office, which specialises in trust and tax administration and compliance, is ready to assist.

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