 
After reading What is a Trust Fund under the Pre-Need Code of the Philippines?, read also On Payment of Plan Proceeds
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Trust fund refers to a fund set up from the planholders’ payments to pay for the cost of benefits and services
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The pre-need company shall make monthly deposits to the trust fund
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The trust fund shall at all times be sufficient to cover the required pre-need reserve
The Pre-need Code of the Philippines or Republic Act No. 9829 provides that to ensure the delivery of the guaranteed benefits and services provided under a pre-need plan contract, a trust fund per pre-need plan category shall be established.
A trust fund refers to a fund set up from the planholders’ payments to pay for the cost of benefits and services, termination values payable to planholders and other costs necessary to ensure the delivery of benefits or services to planholders as provided for in the contracts.
Assets in the trust fund shall at all times remain for the sole benefit of the planholders. At no time shall any part of the trust fund be used for or diverted to any purpose other than for the exclusive benefit of the planholders. In no case shall the trust fund assets be used to satisfy claims of other creditors of the pre-need company.
Are the benefits received by the planholders subject to tax?
The law says:
No.
The benefits received by the planholders shall be exempt from all taxes and the trust fund shall not be held liable for attachment, garnishment, levy or seizure by or under any legal or equitable processes except to pay for the debt of the planholder to the benefit plan or that arising from criminal liability imposed in a criminal action.
The trust fund shall at all times be sufficient to cover the required pre-need reserve.
How often should a pre-need company make deposits do the trust fund?
The law says:
The pre-need company shall make monthly deposits to the trust fund in an amount determined by the accredited actuary, sufficient to pay the benefits promised under the contract.
For plans paid for in full, the pre-need company shall deposit into the trust fund at least forty – five percent (45%) for life plans and fifty – one percent (51%) for education and pension plans of said full payment or such higher amount as determine by the actuary.
In case of installment payments, the minimum limits of the deposit contributions to the trust fund, unless the viability study done by the actuary requires otherwise, shall be in accordance with the following schedule:
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Life Plans |
Other Plans |
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Collection of the 1st 20% of the Contract Price |
5% |
5% |
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Collection of the 2nd 20% of Contract Price |
10% |
10% |
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Collection of the 3rd 20% of Contract Price |
70% |
80% |
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Collection of the 4th 20% of Contract Price |
70% |
80% |
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Collection of the 5th 20% of Contract Price |
70% |
80% |
Contributions to the trust fund shall not form part of the income or gross receipts of the pre-need company and, therefore, shall not be available for dividend declaration or payment to creditors.
Take note that the deposits to the trust fund shall be made within twenty (20) days from the end of each reference month for payments received from plans whether paid for in full or in installments. Failure to make the trust fund deposit shall subject the pre-need company to administrative liability as provided for under the Pre-need Code of the Philippines.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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