My husband and I are discussing providing for the creation of a testamentary trust in our will to take care of our minor children upon our untimely death.
I’m worried that if we establish a trust, it may be too rigid to deal with the changing circumstances of our children. Can the trust be changed after our death should it be necessary to do so?
A testamentary trust or trust mortis causa is established in a will and comes into effect upon the death of the testator (founder) of the will. Such trusts are typically used to protect the interests of minors or dependants who are unable to take care of themselves.
Some or all of the assets in the estate upon the death of the testator moved to the trust which is administered by trustees on behalf of the beneficiaries. A testamentary trust often terminates at a pre-determined time or event, for example when the beneficiaries reach a certain age.
As a rule of thumb the terms of a testamentary trust cannot be amended. The Trust Property Control Act 57 of 1988 (“The Act”) does grant our Courts the power to amend a trust deed, where for example a provision brings about consequences which in the opinion of the court, the founder of a trust deed did not contemplate or foresee and which hampers the achievement of the object of the founder, prejudices the interests of the beneficiaries or is in conflict with the public interest.
Accordingly, in a recent High Court decision, it was found that a variation of the provisions of a testamentary trust (brought about by the agreement between the trustee and the beneficiaries) was valid. Despite the fact that a trust is of testamentary origin, it does not prevent the beneficiaries and trustees from agreeing to an amendment. The court further stated that if the testamentary trust also confers on a trustee the power to decide when to terminate the trust, it also implies that the trustee has the power to amend the trust deed.
The provision of the Act which requires a trustee to, in exercising his powers, act with the care, diligence and skill which can be reasonable expected of a person who manages the affairs of another, still applies, and should a trustee decide to amend the provisions of the trust, the trustee will need to exercise his authority in accordance with the Act.
It is therefore possible that your trust provisions may be varied after your death. We would advise to enlist the help of your estate planner to ensure that your testamentary trust provisions are appropriately wide to provide sufficient scope to the trustees to manage (and if necessary amend) the trust in changing circumstances in a matter that is acceptable to you.