Issue: September/November 09
Not always black and white
Manager: Absa Trust Beneficiary Fund & Employee Benefit Trusts Marketing
In the world of the trustee, most issues are black and white. There are rules and forms and requirements that must be done and done in a prescribed way. The major exception to this is the grey area of dealing with death benefits.
Most trustees look at the allocation of death benefits with a certain amount of trepidation. There are no fixed rules. The allocation is at the discretion of the trustees. What trustees should always ask themselves when looking at the allocation is, “what would I like the trustees to do if I had to pass away”.
A duty of trustees is to look after another’s assets as well or better than they would their own. The same applies when assessing the allocation of death benefits. Trustees need to do a thorough investigation to establish all the known dependants of the deceased. This means talking to the family of the deceased as well as the staff that worked with the deceased. There is a 12 month period in which to find all dependants and to ascertain their level of dependence. Once the investigation is complete, trustees need to make their allocation.
Cathy McClune of Absa Trust says that this is where trustees start to look at the black and white aspects. Trustees need to ascertain the investment expertise of the spouse. This is a difficult factor to determine as most people are not familiar with managing lump sums especially when the funds need to provide for the future education and maintenance of the minor children.
Some trustees look at the costs involved in placing funds for minors into a beneficiary fund. All investments have costs involved but with a beneficiary fund, the level of service that the guardians receive as well as the active management of the funds makes this a good option for trustees to look at.
When the funds are placed into a beneficiary fund, the funds are invested to provide an income as well as providing growth of the investment. The guardian of the beneficiaries can approach the fund for ad hoc payments for educational and other needs of the beneficiary. A relationship is formed between the administrator and the family. At Absa Trust the administrators deal with funds that originate from a particular fund and as there is no call centre, they deal with the families on an individual basis. Administrators have even been invited to the 21st birthday parties of beneficiaries as a thank you for all that they have done for the beneficiary over the years.
So for trustees, to make a decision when it comes to the allocation of death benefits, McClune suggests that you take the information received from the investigations, look at all the relevant issues detected and then make a decision that is not based on black and white issues, but at what is best for the dependants of the deceased. Ask yourself what you would have wanted the trustees to do if it was you.