Sole trustee and beneficiary
The court in Groeschke v Trustee, Groeschke Family Trust and Others 2013 (3) SA 254 (GSJ) had to decide, amongst other things, whether it is possible for a sole trustee of a trust to become the sole beneficiary at the same time.
The facts were:
- Heinrich Groeschke (the father) founded a trust, with himself as sole trustee and his son, R, as capital and income beneficiary. The father and son later fell out. The father subsequently drafted, signed and lodged with the Master a resolution in which he removed R as a beneficiary, replaced by himself, and appointed a third person, B, as an ‘alternative’ trustee;
- when the father passed away, R applied to the High Court for an order declaring the father’s changes to the trust invalid.
The court held that:
- there was authority that a trustee may be a beneficiary at the same time.
- where a sole trustee of a trust becomes its sole beneficiary this would conflict with the principle that control of the trust property must be kept separate from its enjoyment, with the controller exercising control on behalf of another, but where the sole trustee also becomes the sole beneficiary would not invalidate a trust.
Thus, a distinction is drawn between the situation where the trust is created ab initio with only one trustee, who is also the sole beneficiary, and the situation where the sole trustee later, after the trust has already been established, becomes the sole beneficiary. The first situation occurred in Land and Agricultural Bank of South Africa v Parker and Others 2005 (2) SA 77 (SCA), in which the court held that no trust had come into existence. The latter situation is what occurred in Groeschke v Trustee, Groeschke Family Trust and Others.