Ratanang Family Trust must be one of the most infamous Trusts currently in South Africa. Its association with EFF leader, Julius Malema as one of the Trustees and subsequent tender fraud has shed spot light on this Family Trust.
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The Ratanang Trust has been associated with shareholding in companies that Mr. Malema used for his ‘illegal’ tender businesses as well as tax evasion from SARS. With over R5.7m deposited into the Trust bank account by way of 166 cheques, the Trust was supposedly used to channel money from contractors favoured for tenders within the Limpopo government. In addition, he was the sole signatory of the Family Trust bank account.
Spending of the money was also dubious if not outright dishonest! According to Sunday Independent, “Malema appeared to have used the funds for his own benefit, spending nearly R380 000 on designer clothes, and transferring over R200 000 to his personal account.”
The Trust Deed for this Trust indicated that it was set-up to benefit his son![1]
However, in every calamity and undesired situation, there are always lessons that can help us deepen our understanding of how to do things right.
Having been involved in Trusts and Trust Administration over the years, here are my three take away lessons and hopefully yours too!
- Establish a clear independence of Trust and you as an individual. This should be done by way of Separate bank account, Independent Accounting Officer, Independent Trustee and well documented procedural processes of administering the Trust.As a Trustee or Beneficiary within a Trust, it is important to clearly isolate the affairs of the Trust with those of the individual. Utilization of an independent Trustee with experience, skills and knowledge is crucial towards advising the Trustees on how to best run a Trust according to laid out legislation.
- Utilize the Trust for what it has been formed for. Ratanang Family Trust was allegedly named after Julius Malema’s son and formed with him as a beneficiary[2]. However, the purposes for which it was formed are very different from the actual activities that transpired in its every day transactions.Numerous dealings, revenue streams and inappropriate expenses that transpired in the Trust had nothing to do with the core function for which it was formed. This did not only raise eyebrows to the authorities, but could not be construed as fraudulent, sham and illegal.
- Separation between Trustees of the Trust and Beneficiaries – A clear separation needs to exist between Trustees and Beneficiaries within a Trust. Mr. Malema evidently did not understand this separation.The use of funds within a Trust for personal gain as well as transfer of the funds to his personal account blurs his independence from the Trust and brings Personal tax implications through distributions or donations.
Regardless, Trusts remain one of the most practicable and efficient structures for Asset Protection, Succession Planning and Reduced death taxation. This is especially most evident if you utilize the Twin Trust Structure set-up.
The correct procedural Trust Administration, Trust Accounting and Legal Advice is crucial to ensure clear separation of your assets from you as an individual.
By Dr. Chomba Chuma
CEA, MD – Mumbi Legacy
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[1] http://www.timeslive.co.za/local/2012/12/09/malema-using-ratanang-family-trust-for-own-benefit-report
[2] http://mg.co.za/article/2011-07-24-julius-malema-the-trustfund-kid
