Have you ever thought who you will leave your assets and investments with for your children who are below majority age in the event of death while they are still minors?
If you have been working for more than 10 years after college you may accumulated a sizable sum of money in your retirement plan. In addition most employers will provide 2 types of benefits which are payable on death of staff. Thus a group life assurance scheme which could be around 3 times annual salary and work injury benefit Act benefit which is 8 times annual salary payable on accidental death. To bring into perspective we take an example of an employee who earns annual salary of Kshs 1.2 million and passes away by accident. The benefits payable are group life assurance cover of Kshs 3.6 million and work injury benefit of Kshs9.6 million which is a total of Kshs 13.6 million. This is in addition to accumulation of benefits in the retirement plan.
With the above benefits payable on death the question is who will be in control to ensure the rightful beneficiaries receive their benefits. In our experience most employees will nominate spouses as beneficiaries in the event of their death. This is good in so far as the spouse has the capacity to manage the benefits for the children who may be minors. In 70% of the cases these funds are mismanaged in trying to run businesses without experience, making uninformed investments which yield less or losses. If the minors have another 10-20 years to get mature then the investments and business established should live this long to pay expenses related to upkeep and school fees.
There is safer and more informed way of managing your children’s benefits in the event of death. You can engage a trust management company to set up a children education trust which will take care of education, upkeep and medical care for your children until they reach majority age of up your choice. The funds are invested by investment professionals with an investment policy statement which is prepared with the children’s ages in mind to ensure better returns but also safe asset classes. The investment income helps to lengthen the term of provision of benefits to the children
We run a portfolio of trusts for over 200 children across the nation with fund values totaling over Kshs 120 million. We manage the trusts for children of parents who passed on in 1998 bomb blast which is spread across the nation in different counties. We have over 15 years of establishing, managing and winding up trusts.