Evaluating courts' discretion to award trust assets in divorce matters
Abstract
In recent years, the establishment of trusts has increased. The reason for trusts is
mainly for the protection of trust assets. A founder creates a trust by donating assets
toward the trust and the trust in turn offers protection for those assets from third
parties and creditors. Due to the protection gained from a trust, it often happens that
founders or trustees misuse or abuse trusts by using the assets in the trust for their
own personal use and not for the benefit of the trust beneficiaries.
In this paper, the overarching question that was asked was to what extent does the
Court have the discretion to include trust assets in determining a redistribution order in
terms of section 7 of the Divorce Act 70 of 1979. In terms of section 12 of the Trust
Property Control Act 57 of 1988 the assets in a trust do not form part of a trustee's
personal estate.
The aim of this study was to get a better understanding of how trusts work and how
they are abused or misused. The requirements of a valid trust were also examined
along with the basic principles of trusts. An important part of this discussion is also the
relationship between marriage, divorce and trusts. The obligations of trustees as well as
the consequences of not adhering to trust principles were also investigated.
The cases that form the basis of this investigation are the Jordaan v Jordaan 2001 3 SA
288 (C) and Badenhorst v Badenhorst 2006 2 SA 255 (SCA). In both these cases the
Court dealt with the question whether or not trust assets should be included in a
redistribution order. Other cases that form an important part of this study is Land and
Agricultural Development Bank of SA v Parker 2004 4 SA 621 (SCA) where the Court
emphasised the importance of the separation of control, Braun v Blann and Botha 1984
2 SA 850 (A) and Miller v Miller 2014 JOL 32176. In all these cases the question before
the Court was whether the assets in an inter vivos trust could be included in the
determination of a redistribution order. The problem comes when the founders or the
trustees do not relinquish control over the trust assets. If this happens, the trust may
be seen as an alter ego, which will leave the assets of the trust exposed to creditors.
The purpose of this research was therefore to determine which factual circumstances
the Court takes into consideration and to what extent the Court’s discretion extends in
determining whether or not trust assets should be included in a redistribution order.
Keywords: Trusts, Marriage, Divorce, Marriage dispensation system, Redistribution
order, Spouses, Court's discretion.
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- Law [826]