Trusts are a valuable tool for holding assets, facilitating estate administration and benefiting persons across multiple jurisdictions. They fall to be juridically interpreted according to whether they are created as a testamentary trust (mortis causa) or by an act between persons (inter vivos).
When the legal reach of a trust crosses multiple jurisdictions, an important question arises: which country’s law governs the trust?
South African trust law is an evolutionary hybrid, drawing on both Roman-Dutch and English common-law principles. This creates particular complexity in cross-border matters, as different laws may govern the trust’s creation, validity, interpretation and administration.
For trusts holding immovable property, the general rule is that the law of the country in which the property is situated (the lex situs) will apply. This law will ordinarily determine whether the trust is valid and how the property may be administered or transferred.
The position is less certain where a trust holds movable assets, such as shares, investments or funds. In these circumstances, the founder’s express choice of law may be decisive. Where the trust instrument does not identify the governing law, the court may consider factors such as the founder’s domicile, the location of the assets and the place where the trust is administered.
The distinction between interpretation and administration is also important. In Estate Kemp and Others v McDonald’s Trustee (1915 AD 491), the testator’s domicile was held to govern the interpretation of the testamentary dispositions. In Wynn NO and Westminster Bank Ltd NO v Oppenheimer and Others (1937 TPD 91 / 1938 TPD 359), the court distinguished between questions of interpretation, governed by the law of the testator’s domicile (domicilii), and questions of administration, governed by the law of the place (locus) where the trust was administered.
Similarly, in Kalshoven v Kalshoven and Another NO (1966 (3) SA 466 (R)), the court confirmed that trustees must administer a trust in accordance with its terms and the general trust law of the country in which the trust is administered (locus of administration).
Internationally, the Hague Convention on the Law Applicable to Trusts and on their Recognition (the Hague Convention on Trusts) provides that the person establishing the trust may select the law which governs it. Where no express choice is made, the applicable law is determined by identifying the jurisdiction within which the trust is most closely connected. Relevant factors include the place of administration, the location of the assets, the trustees’ residence or place of business, and the trust’s objectives.
South Africa has not incorporated the Hague Convention into domestic law. The legal position on trusts and private international law remains underdeveloped, and any attempt at systematic exposition would be premature. This uncertainty makes careful planning and drafting essential.
Founders and trustees should ensure that trust instruments clearly identify the intended governing law, place of administration and powers of the trustees. Professional advice should also be obtained before moving trust assets, appointing foreign trustees or changing the place of administration. Addressing these issues at the outset can reduce the risk of disputes, conflicting legal obligations and unintended tax or regulatory consequences.
For guidance on the legal and practical implications of cross-border trusts, or advice tailored to your particular circumstances, please do not hesitate to contact C&A Friedlander Inc.
Article by:
Mersini Geragotellis
Candidate Attorney
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).