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  • Maren de Klerk

MANAGING THE EXPECTATIONS OF BENEFICIARIES IN TERMS OF A DISCRETIONARY TRUST DEED


Oftentimes Trustees of a Trust must deal with unreasonable demands/expectations of

Beneficiaries of a discretionary Trust.


In simplistic terms, a Trust is an agreement between two or more persons in terms of which

a number of Trustees are appointed to receive, hold, administer and distribute certain Trust

Assets for the benefit of a number of Beneficiaries. This document is called the Trust Deed.


A Trust is usually created by the Founder, who will decide to establish a Trust to for e.g.,

preserve family assets or family business for the benefit of one or more Beneficiaries.


The Trustees in turn are the persons to who the trust assets are entrusted. They are

appointed by the Founder and are responsible for utilizing the Trust assets in accordance

with the Founders’ intention and to the best advantage of the Beneficiaries.


In a discretionary Trust, the Trustees are usually vested with such discretionary rights and

powers to act on behalf of the Trust. These discretionary powers empower the Trustees to

award income and/or assets of the Trust to certain Beneficiaries as and when they consider

it prudent to do so, subject to any specific directions as contained in the Trust deed.


The Beneficiaries are the persons appointed by the Founder to be the recipients of either

the assets and/or the Income of the Trust.


In a discretionary Trust, the Trustees will from time to time decide who will benefit from the

Trust, taking all circumstances into consideration including the provisions of the Trust deed.

In these cases, Beneficiaries sometimes wrongly believe that they are entitled to income/

capital form the Trust. In a discretionary Trust, the Trustees have the sole discretion to

decide what income/assets are to be distributed to the Beneficiaries whilst the latter have

no vested rights to claim any benefit from the Trust, but merely a hope of receiving

assets/income from the Trust.


In order to manage such unreasonable/uninformed expectations of the Beneficiaries, it

would be best for the Trustees to adequately and on a regular basis communicate and

inform the Beneficiaries of the provisions of the Trust Deed and the discretionary powers of

the Trustees, albeit that the Trustees must exercise such discretion with the necessary care,

diligence and skill.

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