When Sylvia Wariara’s mother passed on three years ago, it was the most devastating phase in her life. Her mother died in a road accident when Sylvia was in college and her younger sister, Catherine Wanjira, was in high school.
Soon after their mother was buried, they received a phone call from a stranger informing them of a trust fund she had left for them.
“We got a call from a Mr Michael Ndung’u in 2017 around April. He told us there was a trust fund our mother had left us and that if we needed anything we should call him and they would sort us out,” narrates Sylvia Sylvia recalls that six months before her mother passed away, she had revealed to them that they would never struggle even if she died as she had already secured their future. That call confirmed all the best laid plans that their mother had been telling them.
By definition, a trust fund is set up by a grantor for the benefit of another individual who is regarded as the beneficiary. It may comprise of investments, cash, real estate or other assets that can ensure future financial security of the child or grandchild in some instances. By rule of the thumb, such funds cater for the immediate needs of the beneficiary such as education, medical, food and others.
“The beneficiary does not own the trust property, but has the right to receive the benefit of the property as the trust allows. For example, a child can receive payments for college fees, upkeep or medical care. The trustee is responsible for managing the property owned by the trust. Think of trustees as the corporate officers. A trustee can be an individual or an organisation,” says David Ngava, Octagon Africa Pension Administrator.
Accessing the funds
At first, they had to go to the office with their aunty, who was their guardian since Sylvia had not yet attained the legal age of 18 years. Kenyan law considers people below 18 years old not capable of making life changing decisions. A guardian who had been appointed by the deceased shall act in the best interest of the minor until the minor comes of age. This request for payments shall be received and reviewed by the trustees.
“We were not allowed to access the money anyhow. We had to have a convincing reason why I needed it. Then we would draft a letter to the accountant, who would then present it to the CEO. They ask a lot of questions before the money is approved,” explains Sylvia.
Once Sylvia reached 18 years old, she was given authority to have money deposited in her account monthly.
According to David, when the funds are in a trust, they are invested by the trustees prudently and at the same time pay-outs are made from the trust depending on the prevailing needs and demands of the beneficiaries. Approval for access of funds is given by the trustee. Sylvia and her younger sister receive a monthly salary to cater for their monthly shopping and all other monthly expenses.
They are glad that the trust fund has saved them from the trouble of people in the name of guardians coming up to claiming their mother’s money. They were able to honour their mothers wish of adding extra rooms to their rental property with the guidance of the trust. They are also thankful for the invaluable financial lessons they have been taught by the trust.
“We are able to travel during the holidays as well as learn how to save and plan for our future, thanks to our late mother. She made sure our lives continue normally,” she says Her mother had insurance too before she passed on, which they used to cater for her funeral expenses. Sylvia’s late mother would tell her about the chamas she was involved in and what happened in those meetings, so they were able to seamlessly pick from where she left.
When it comes to investing the funds, the trust has invested in various asset classes both long and short term from Treasury bonds, Treasury bills, quoted equities and fixed deposit. This diversification ensures fund investments are stable and sustainable into the future.
The duration of the trust fund is based on the injections, interest and withdrawal of funds. When Sylvia finds a job, she plans to request the trust to stop the monthly payments so that they can cater for their needs with it as the cash is invested in other projects.
“It’s good to tell your children about investment groups and pension funds you have enrolled in. As much as they are afraid that when they know they will waste it, such information opens their mind and should anything happen to you, they will be taken care of. You child too can start investing in such and make better financial decisions,” she concludes.
By HARRIET JAMES