Fairheads

Beneficiary funds undoubtedly provide better protection for dependants’ funds than umbrella trusts. This is because they fall under the Pension Funds Act, whereas umbrella trusts fall under the less stringently regulated Trust Property Control Act. There are also tax advantages. Lump sum payments from approved funds into a beneficiary fund are tax exempt, whereas those into an umbrella trust are taxed before transfer.

However, only section 37C death benefits (approved benefits) payable by a registered fund for the benefit of a dependant or nominee may be paid to a beneficiary fund. This means that in the case of benefit payments from unapproved funds e.g. group life, MVA claims and other policies, only an umbrella trust can be used.
 
Death benefits payable in terms of section 37C may also be paid into a trust, provided that -

a)  a trust is nominated by the member, or

b)  at the request of a major dependant or nominee, or

c)  at the request of a person recognised in law as the person responsible  for managing the affairs or meeting the daily care needs of a dependant or nominee.