ON TERMS AND CONDITIONS OF A TRUST FUND UNDER THE PRE-NEED CODE OF THE PHILIPPINES

After reading On Terms and Conditions of a Trust Fund under the Pre-Need Code of the Philippines, read also What is a Trust Fund under the Pre-Need Code of the Philippines?

• A trust fund must be established separately for each type of pre-need plan with the trust department of a trust company, bank or investment house doing business in the Philippines

• The trust agreement shall be submitted to the Insurance Commission for approval before execution

• The trustee shall have the exclusive management and control over the funds

Republic Act No. 9829 or the Pre-need Code of the Philippines provides that a trust fund must be established separately for each type of pre-need plan with the trust department of a trust company, bank or investment house doing business in the Philippines.

The trust agreement shall be submitted to the Insurance Commission (Commission) for approval before execution.

What should be the contents of the trust agreement?

The law says:

The trust agreement shall be submitted to the Commission for approval before execution and shall contain the following salient provisions, among others:

1. The manner in which the trust fund is to be operated;

2. Investment powers of the trustee with respect to trust deposits, including the character and kind of investment;

3. Auditing and settlement of accounts of the trustee with respect to the trust fund;

4. Basis upon which the trust fund may be terminated;

5. Provisions for withdrawals from the trust fund;

6. That the trustee shall submit to the power of the Commission to examine and verify the trust fund;

7. An undertaking by the trustee that it shall abide by the rules and regulations of the Commission with respect to the trust fund; and

8. An undertaking by the trustee that it shall submit such other data or information as may be prescribed by the Commission.

What are the responsibilities of the trustee?

The law says:

The trustee shall:

1. Administer and manage the trust fund with utmost good faith, care and prudence required by a fiduciary relationship;

2. The trustee shall have the exclusive management and control over the funds and the right at any time to sell, convert, invest, change, transfer or otherwise change or dispose of the assets comprising the funds within the parameters prescribed, by the pre-need company and provided these parameters are compliant with the Commission’s regulations; and

3. Not use the trust fund to invest in or extend any loan or credit accommodation to the pre-need company, its directors, officers, stockholders, and related interests as well as to persons or enterprises controlling, owned or controlled by, or under common control with said company, its directors, officers, stockholders and related interests except for entities which are direct providers of pre-need companies.

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