The value of Trust funds

This is another case study in the series of case studies received from Fairheads Umbrella Trust Company.

Employee-benefit trusts, also known as umbrella trusts, operate in compliance with section 37C of the Pension Funds Act, created in 1989 to allow trustees of pension and provident funds to make lump-sum benefit payments in trust for dependants.  Such trusts have the ability to generate monthly income to suit the beneficiaries and are generally used to pay for dependants education.

This series of case studies represent some of the many examples handled by Fairheads Umbrella Trust Company. The Fairheads call centre in Cape Town takes an average of 250 calls every day, in most languages, from beneficiaries around the country, often via cell phone from rural areas.

Please note the names of beneficiaries have been changed for reasons of confidentiality.

Example: Trust funds used to benefit a 5-year HIV-positive orphan.

A five-year old HIV-positive child in Khayelitsha, Cape Town was orphaned.  Her grandmother refused to care for her on the grounds of her HIV status, so the childs great aunt is the guardian.  The lump-sum benefit in trust is small, approximately R35 000, and on the recommendation of the administrator, the trustees took a decision to allocate a certain amount of capital per annum to assist with the beneficiarys expenses over and above the basic educational requirements, on the basis that the life expectancy is not high and the childs quality of life should be improved.