Essential Requirements for a Family Trust in Zimbabwe

Family trusts are now popular in Zimbabwe and a significant number of individuals and / or families are now setting up family trusts in Zimbabwe. It is therefore important to know the essential requirements to set up a family trust in Zimbabwe.

If a family trust is not formed or administered correctly, it can create a legal nightmare and affect all the parties to the Trust, and have the founder of the family trust, question the very reason for its establishment in the first place. Thus, anyone thinking of setting up a trust in Zimbabwe should be aware of the essential requirements for a family trust.

To establish a valid family trust in Zimbabwe, the following essential requirements must be met:

1. Choose a Name for Your Trust: In general, a family trust will easily be identifiable by name, or by descent or by degree of kinship. It is not a legal requirement that a family trust bear the name and / or surname of its founder, however, it should have a specific name.

2. Clearly Defined Purpose: The term 'family trust' is not a legal term, but is merely a descriptive term to distinguish a family trust, from other types of trusts. However, like other trusts in Zimbabwe, it must have a specific objective (i.e., purpose), which is lawful.

3. Trust Deed: The law on trusts in Zimbabwe is a mixture of English Law, Roman - Dutch Law and Zimbabwean law. Furthermore, Scottish trust law is an important comparative jurisdiction in Zimbabwe. Resultantly in Zimbabwe, it is possible to have a valid verbal / oral trust which has not been reduced in writing.

However due to the fact that the process of setting up a family trust can be complicated and overwhelming, particularly for those who are not familiar with the legal requirements, it is essential to have a well - drafted deed of trust.

The Trust Deed is an important document which sets out the terms and conditions of the family trust. It should information have the name of the founder(s), the trustees and the beneficiaries, the objective of the trust, the rights and entitlements of the beneficiaries as well as provide information on the appointment, removal and replacement of trustees, together with information on how the trust's capital and income will be distributed.

4. Appointment of Trustees: Trustees must be competent, independent and willing to act in the best interests of the beneficiaries to administer and manage the trust. A trustee must be at least eighteen (18) years of age, competent to contract and capable of fulfilling fiduciary duties. There are no restrictions on local and / or foreign residents acting as Trustees in Zimbabwe.

5. Beneficiaries: A trust without a beneficiary is invalid. Thus, the beneficiaries must be clearly identified, ascertainable or determinable in the trust deed. In a family trust, the beneficiaries typically are family members entitled to receive financial benefits including maintenance or assets from the trust.

6. Registration with the Registrar of Deeds: Due to the fact that the law of trusts in Zimbabwe is largely regulated by common law, the Master of the High Court is not empowered to register Trusts in Zimbabwe. The trust deed is in essence a notarial document, and as such must therefore be lodged with the Registrar of Deeds for purposes of registration. Once it is approved, the trust will receive a unique trust registration number.

7. Open a Bank Account for the Trust: The creation of a bank account is not strictly speaking a requirement for a valid trust, but it is important for the trust assets to be kept and maintained separately from those of the trustees and the beneficiaries. It is for this reason, that pursuant to the registration of a deed of trust in Zimbabwe, a trust should open and maintain a separate bank account.

8. Compliance with Tax Laws: It is important that a trust be registered with the Zimbabwe Revenue Authority (ZIMRA) and comply with all the relevant tax laws, including but not limited to estate duty, capital gains and income tax.

9. Transfer assets to the Trust: The cession / donation (transfer) of trust property to the trust, is not a requirement for a valid trust, as long as the trustee has a right to transfer. It is equally important to note that, the fact that an individual and / or family has registered a family trust, does not necessarily mean or imply that their assets are now vested in the family trust. It is therefore important that trust assets, investments or other property, especially immovable property (i.e., houses), be ceded or donated to the family trust. The transfer of assets to a family trust, is a legal process which may require share transfers and / or title deed transfers i.e., conveyancing. The assets of a trust vest in the Trust, and not in the trustees, and further donations may from time to time be made to the family trust, upon cession or transfer, as considered necessary for the administration and management of the trust.

10. Administration and management of the family trust: Once the family trust has been registered with the Registrar of Deeds, and its bank account opened, and its assets transferred, it is important to maintain and manage the family trust efficiently and effectively. It is prudent to seek professional assistance in managing the trust's affairs, which may include engaging the services of accountants and lawyers and regularly review the trusts objectives.