For a valid trust to be created the founder must intend to create one, he must express his intention in a mode apt to create an obligation, the property subject to the trust must be defined with reasonable certainty, the trust object, which may either be personal or impersonal must be defined with reasonable certainty and finally, the trust object must be lawful (Cameron 118; Oosthuizen 601).

Intention
A distinction should be drawn between the intention to create a trust in the strict or marrow sense and the intention to create a bewind trust (Cameron 118).
The intention to create an inter vivos trust must be shared by the founder and the prospective trustee (Cameron 119). This is normally quite clear from the trust deed signed by the parties. However, the mere use of the words “trust” or “trustee” are not conclusive and the intention to create a trust has to be inferred from the circumstances and all the words used. Intention is perhaps one of the determining factors to distinguish between a business trust and an ordinary partnership (Goodricke and Son (Pty) Ltd v Registrar of Deeds, Natal 1974 1 SA 404 (N) and B4.2.2 supra; Pezzutto v Dreyer 1992 3 SA 379 (A) and Thorpe v Trittenwein 2007 2 SA 172 (SCA) at 177C–E).
In the case of a testamentary trust, it is not always that easy to determine the founder’s intention, especially when it becomes necessary to distinguish between a bewind trust and a trust in the narrow sense. In this context all the rules for the interpretation of a will discussed in A22 et seq in this book become relevant (cf also Cameron 118 et seq; Oosthuizen 602; A22 et seq supra).
As far as charitable trusts are concerned, intention to create a trust of this nature is of equal importance (Deedat v The Master 1995 2 SA 377 (A) 383 and Hilda Holt Will Trust v CIR 1992 4 SA 661 (A) 667A).
Where the intention to create a trust is lacking, the effect depends on whether the testator or donor intended to benefit the person to whom the property was given. If the intention to benefit was present, the supposed trust is disregarded and the legatee or donee takes free of any burden. If the person to whom the property is given is not intended to be a beneficiary, the gift is invalid and may be recovered by the founder or his estate. If the intention to create a trust is lacking because the trustee is insufficiently independent, the “substance over form” principle can apply and the transaction is then construed for what the real intention is, that is, agency, partnership, sale etc (Cameron 137; CIR v Pretorius 1986 1 SA 238 (A)).

Obligation
An intention to create a trust, however clearly expressed, is not enough unless couched in some form, such as a will, contract, transfer, statute, treaty or judicial order, which is apt to create a legal obligation. The obligation envisaged is either (i) the obligation resting on the trustee to administer the property for the trust object, (which will apply when a trustee has accepted the appointment as trustee and the property has been transferred to or placed under the control of the trustee) or (ii) the obligation resting on the founder or on another to take the necessary steps to ensure that the property is administered by a trustee (which will apply when a trustee has not been appointed or has not accepted office or when, though there is a trustee, the property has not been transferred to or placed in the control of the trustee) (Cameron 137; Oosthuizen 603 and Du Toit 3.2.2). A trust created inter vivos by contract will not be valid unless it is bilateral and the contract creating the obligation is valid (Cameron 143 and 673). For a trust to exist, the founder must either have handed over control of the trust property by a legally valid mode of transfer (thus creating an obligation) or have bound (obliged) himself, for example, by contract to hand it over or he must be bound in some other way, for example, by statute or court order to do so (Cameron 6).
In the absence of a juristic act that imposes an obligation of the appropriate sort, no trust is created and the purported disposition has no legal effect. It follows that the formalities necessary for the creation of a trust are those necessary for the creation of the obligation on which the existence of the trust depends. If the trust is created by will, codicil or other testamentary writing, the formalities prescribed by the Wills Act 7 of 1953 must be complied with. If it is created by antenuptial contract, registration in terms of the Deeds Registries Act 47 of 1937 will be important (Cameron 138).
As stated earlier (B5.2 supra) the trust created by means of a contract is a species of a stipulatio alteri and as such it has to comply with all the requirements of a valid contract (B9.2 infra). A trust inter vivos can be created orally and the Trust Property Control Act does not apply to such trusts whether created before or after the said Act came into operation on 31 March 1989 unless reduced to writing and not necessarily signed (Cameron 139/140 and s 2 of the Trust Property Control Act, 57 of 1988).

Property
The trust property must be defined with sufficient certainty; otherwise no trust is created. It may consist of any asset or group of assets, movable or immovable, corporeal or incorporeal, for example, a farm, furniture, shares, a copyright or the assets of a business (Cameron 146 et seq; Oosthuizen 603 and Du Toit 3.2.3). If no property at all is located in the trustee, a trust only in the wide sense may be the result (Cameron 146–147). If the description of the property is ambiguous, the ambiguity is, in the case of a contract, resolved by recourse to such extrinsic evidence as is admissible for the purpose (Cameron 146–147).
It is, however, essential that the founder should actually be divested or be bound to be divest himself of a part at least of the legal proprietary power over the trust property (Cameron 6). If the description of the property is ambiguous, the ambiguity is resolved like any other in a will or contract by recourse to such intrinsic or extrinsic evidence as is admissible for the purpose. In these matters the intention of the founder is decisive. A mistake in the description of trust property can be corrected on the principle that a merely mistaken description does not prejudice (Cameron 147–148 and 268–269).

Object
The trust object must be defined with reasonable certainty and it must be lawful (Peterson and Another NNO v Claassen and Others 2006 5 SA 191 (CPD) at 196G). In the said Peterson case Bozalek J makes an important distinction between the object and the purpose of a trust. At 197B he states (see B8.5 infra):
“Whilst it is correct that one of the essentials for the creation of a valid trust is that the trust object must be lawful, it does not follow, however, in my view, that a trust is void if it is created with a fraudulent, illegal or immoral purpose . . . There is, in my view, a material difference between the object of a trust and the purpose thereof”.
The object can be personal or impersonal (see also B6.3) and may consist in the benefit of one or more named or ascertainable persons or classes of person, including juristic persons and trustees on behalf of other trusts and/or for one or more impersonal objects such as the education or the development of the community at large or a specific group of individuals. If the person or class for whose benefit the trust is intended is not named or determinable, the trust fails for want of a certain object (Honoré 120 et seq Oosthuizen 604–605; Deedat v The Master 1995 2 SA 377 (A) 383E–384B and Du Toit 3.2.4 & 3.2.5). Even in the case of a business trust the object has to be the benefit of the beneficiaries and not, for example, the acquiring of a piece of land or the development of the land as is required for the object of a company. The latter (the development etc) could for the purposes of the business trust only form ancillary objects or specific powers given to the trustees (Cameron 151 et seq). If the trust object fails, because the beneficiary cannot take or because the object is insufficiently defined, the trust itself falls away (Cameron 171 and the case law referred to by them). If only part of the trust object fails, the remainder, if separable, is nevertheless valid. A trust for an impersonal object can be valid only if it is charitable or for the public benefit. (Cameron 161–177) Here, the object need not be expressed with the precision otherwise required for a trust with a personal object (Cameron 161).
The trust object of a personal trust is also determined by the specific power of appointment conferred on the trustees (B6.3 supra and B8.4.2 infra).

Nudum praeceptum
If the trust derogates from the rights of the owner of the trust property, as in the case of a bewind trust, the restrictions it contains must be imposed in the interest of a person other than the owner (the so-called gift-over) otherwise it constitutes a nude prohibition (nudum praeceptum), in which case the restrictions are unenforceable and the beneficiaries may insist on administering the property themselves to the exclusion of the trustee. This can easily be the case where a bewind trust for minors continues beyond the majority age of the beneficiary or in the case of the typical business trust, where all the beneficiaries contribute to the trust fund and also hold a vested right in it (Cameron 154; Olivier 109 The “majority age” is now 18 years as from 1 July 2007 (s 17 of the Children’s Act 38 of 2005 came into operation in terms of Government Gazette 30030 of 29 June 2007).
Power of appointment
A power of appointment has been termed a “right of disposal” or “power of choosing” (Cameron 583). A distinction is drawn between special (sometimes also called “specific”) and general powers of appointment. Trustees of a trust can be vested with special powers of appointment for the ultimate distribution of the trust property amongst named or ascertainable beneficiaries (Olivier 114 and Du Toit 6.3.2.1 and 9.5) and can be conferred, inter vivos, in an agreement or upon death in a will. A trustee of a trust cannot have a general power of appointment unless he has a beneficial interest in the trust property which will only be possible if he were, at the same time, a beneficiary. For these purposes it is not just any form of beneficial interest but depending on the trust deed, will either be a usufructuary or fiduciary interest in the trust property or the beneficiary will be entitled to unrestricted ownership of it. A mere spes is therefore not sufficient to vest a general power of appointment in a beneficiary (Olivier 114; Cameron 584 and see below; Cir v Lukin’s Estate 1956 1 SA 617 (A)).
When a discretion is conferred on the trustees of a trust the object of which is to benefit individuals, such a power of appointment is valid if the beneficiaries or classes of beneficiaries from whom the appointment is to be made are specified. If they are not, the trust fails for want of a defined object and, if it is a testamentary trust, it may amount to an improper delegation of testamentary power. In Braun v Blann and Botha NNO 1984 2 SA 850 (A) 866H–867A Joubert JA states:
“It is one of the functions of our law to keep pace with the requirements of changing conditions in our society. To recognise the validity of conferring our common law powers of appointment on trustees to select income and/or capital beneficiaries from a designated group of persons, would be a salutary development of our law of trusts and would not be in conflict with the principles of our law”. (See also B11(e) infra and Administrators, Estate Richards v Nichol 1996 4 SA 253 (C); 1999 1 SA 551 (SCA) 557A–D.)
Joubert JA in Braun v Blann & A 1984 2 SA 850 (A) at 867D–F also made it clear, that where a person in a will leaves it to the trustees to create a new trust for certain beneficiaries but, leaves the appointment of trustees of such a “roll-over” trust and the vital terms in respect of payment of income and/or capital, entirely to the discretion of the trustees, then this amounts to “a delegation of will-making power which exceeds the scope of a mere power of appointment of income and/or capital beneficiaries from a specified group of persons” and he declared such a proviso in the will to be invalid.
Wunsh, however, strikes a cautionary note (1986 De Rebus 436. See also his and Jaffe’s comments in 1982 De Rebus 529) in the light of the Braun case, that if the discretions granted to trustees of a beneficiary inter vivos trust (and in the example below, also the testamentary trust) go wider than the guidelines laid down in the Braun case, it may well be, that the granting of such wide discretions to trustees will afford a ground for invalidating the appointment of the trust as a beneficiary. However, if the beneficiaries of the inter vivos trust (and, in the example, also those of the testamentary trust) are clearly defined and the discretion given to the trustees is limited to selecting from amongst the defined group or class of beneficiaries the specific capital beneficiary, the bequest will be valid (Olivier 162).
If the trustees are to select beneficiaries from “such other persons as may be nominated by the trustees”, Cameron (153) is of the view that such a trust is valid if the trustees are to select persons who satisfy objective criteria such as being willing and able to pay for the benefits (from development trusts) but not if they are given arbitrary discretion in making the selection such as leaving it entirely to the trustees to decide from time to time who the beneficiaries of a trust should be (with no indication of any criteria whatsoever). Apart from the fact that such a stipulation will invalidate the trust on grounds of it being a general power of appointment the object of such a trust also becomes extremely wide and vague and can therefore cause invalidity of the trust also on such grounds (Honoré 120 et seq Oosthuizen 604–605; Deedat v The Master 1995 2 SA 377 (A) 383E–384B and Du Toit 3.2.4 & 3.2.5).
When a power of appointment is conferred on a beneficiary his range of choice may be unlimited (Cameron 153 and 583 et seq; B6.3 supra). This, however, is still a grey area of the trust law and depends on (i) when there is no gift of the capital in default of an appointment (Cameron 584), or (ii) when there is a gift of the capital in default of an appointment (Cameron 588). A power of appointment is not a species of property and is therefore not taxable (Cameron 584).
Insolvency protection
When property is given to a beneficiary with a gift over to trustees to hold in trust for him in the event of his insolvency, the assignment of his estate, the issue of an interdict against him, the attachment of his property or some similar misfortune, it amounts to a nude prohibition and is automatically invalid (Ruskin v Sapire NO 1966 2 SA 306 (W)). Since the beneficiary owns the property and the restriction is imposed purely in his own interests, it does not bind him, nor does it render protection against insolvency because the gift over to the trustee may constitute a disposition which contravenes the insolvency laws. However, if a beneficiary of a discretionary trust should become insolvent and the dispositions to the trust falls outside the limited scope of dispositions in terms of the insolvency law, proper protection can be rendered to the trust fund vis-à-vis the creditors of such an insolvent beneficiary (cf also Roothman 1992 De Rebus 61; Cameron 571 and Olivier 81–82, 242).

Legality
The object of a trust must be lawful. In Peterson and Another NNO v Claassen and Others 2006 5 SA 191 (C) Bozalek J makes an important distinction between the object and the purpose of a trust. At 197B–E he states (see B8.4 supra):
“Whilst it is correct that one of the essentials for the creation of a valid trust is that the trust object must be lawful, it does not follow, however, in my view, that a trust is void if it is created with a fraudulent, illegal or immoral purpose . . . There is, in my view, a material difference between the object of a trust and the purpose thereof. The object is openly proclaimed and ascertainable and all parties who have dealings with that trust will be held to have knowledge of the trust’s object. In the present case, the objects of the three new trusts . . . were entirely lawful, the primary object being in each case ‘om bates en inkomste te bekom en aan te wend tot uiteindelike voordeel van die begunstigde’.
By contrast, where a trust is formed for an illegal or unlawful purpose, this knowledge is jealously guarded by those who harbour such purpose. This is but one reason, although an important one, why the purpose of a trust, where it is an illegal or immoral purpose but is known only to the founder and to the trustees, cannot be equated, in all circumstances, with that trust’s (lawful) object”.
The fact that a trust is created for an unlawful purpose does not automatically render it void (Peterson case 198G–H). Where a trust is created for an illegal purpose, agreements which it thereafter purports to conclude may be void or voidable, in accordance with ordinary contractual principles and depending on the circumstances surrounding the conclusion of each agreement (Peterson case 199A).
It also follows that the ordinary rules, be it the rules of the law of contract in the case of an inter vivos trust or the rules relating to the drafting and signing of wills for the testamentary trust, must be complied with (cf B9.1 and 9.2 infra).
It is interesting to note that the legality of an inter vivos trust is not determined by the Master or any other state authority. Although the trust instrument must be registered with the Master in terms of section 4 of Act 57 of 1988, contrary to what is often believed, the state does not censor its objects, but it is left to those interested in the matter to establish that the trust is unlawful or invalid (Cameron 176; Oosthuizen 605).
In the case of a testamentary trust, the Master has the power to refuse or accept a will for the purposes of the Administration of Estates Act 66 of 1965 until the validity thereof has been determined by the court, which has the result that any trust created in the will can, therefore, also become invalid (s 8(4); Corbett 103 and Corbett 1994 Supplement 62). In this way the testamentary trust does fall under the Master’s scrutiny for validity (see B13(a) infra).