By David Hurford, CEO, Fairheads Benefit Services

‍The estate planning advantages of trusts are well known, but trusts have traditionally been beyond the reach of the man in the street. Where stand-alone trusts have been set up they are often unnecessarily expensive and a burden to administer.

A neat solution is to use an umbrella trust. This is a cost-effective, professionally administered trust with sub-trusts below it where there is:

• No need to register a trust deed
• Access to funds from day one
• No need to appoint trustees
• A simple process in place
• Transparency on costs
• Peace of mind that funds are safely invested with best of breed investment managers.
  

Fairheads has an umbrella trust product, the Fairheads Legacy Trust, which does all the above and can accept assets from:

• Deceased estates
• Inter-vivos trusts
• Testamentary bequests
• Road Accident Fund (RAF)
• Medical malpractice payments
• Life insurance payments
• Disability policies
• Retirement funds
• Private trusts
• Discretionary savings for education or any other purpose
  

A case study

The below good-news case study shows how an umbrella trust can effectively be used to receive assets from an existing testamentary trust, thus alleviating the administrative burden on those running the trust, such as a lawyer who sets up a stand-alone trust.

In 2018 Fairheads was approached by a family who had lost a parent, leaving a spouse and two young children behind. The spouse was struggling financially and had had to sell off various assets simply to sustain the children. In terms of the Will of the deceased spouse, a testamentary trust had been provided for the minor children and accordingly the Executor, a lawyer and family friend, had created a trust. 

As is often the case, a stand-alone family or testamentary trust is costly and administratively challenging to operate. While with the best interests of the family at heart, the lawyer in question did not have the systems or capacity to manage the investments, attend to income and capital requests, nor to account for the latter. As a result the surviving spouse in the case study in question was frustrated in her attempts to obtain funds to sustain the children. 

Fairheads was asked by the family to approach the lawyer and explained to her how the Fairheads Legacy Trust operates. She was interested and in fact relieved to know about the existence of the product. She applied to the Master of the High Court to have the trust deed amended, allowing assets to be transferred to our umbrella trust.

The family will now have easier access to funds and peace of mind, knowing that the assets are invested with best-of-breed asset managers, a model is in place for calculating the impact of income and capital requests, the administration is “sorted” and they can approach us if they have any questions.