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Your will, your way?

There are many good reasons to have an up-to-date and valid will.

Your will is the only legal document that contains all your last wishes about how your assets should be distributed after you’ve passed away. Therefore, it’s important to clearly state who will inherit your assets, avoiding any conflict or confusion when you can no longer speak for yourself.

Do my retirement benefits form part of my estate?

It’s good to have a will, however it is also important to remember that your retirement fund benefits do not form part of your estate. From a legal point of view a person doesn’t have a free say about pension money, like with other assets in a will. This is to make sure that people who are financially dependent on the person who passed away, are the ones to benefit from the retirement fund benefit.

The Pension Funds Act says that the trustees of the fund must decide who must receive the benefit and how it must be paid. The trustees have to identify the dependants and nominees (beneficiaries) and then decide what will be the most fair and reasonable way to divide the benefit among them. They will take relevant factors such as the extent of financial dependency into account and then say how the benefit will be paid. Read more about updating your beneficiaries here. A deceased’s estate consists of all assets (what is owned) and liabilities (what is owed) at the date of their death. A ‘net estate’ is what is left after all debts and expenses have been paid. Only the net assets are distributed among the beneficiaries of the will.

However on many retirement fund death claims, estates are noted as nominees (or beneficiaries). A nominee is someone who was not dependent on the person who passed away who he or she nominated as a beneficiary to receive the benefit in the fund, in writing, for a specific portion of the benefit.

A nominee must be a natural person, and cannot be an estate, a trust, or a company.


What happens if a person nominated an estate?

An estate cannot be a beneficiary of a retirement fund benefit. A benefit or a portion thereof can only be paid into an estate if there are no dependants, but only nominees, and the person who passed away didn’t nominate beneficiaries for the full 100% of the retirement fund benefit, or where the estate is insolvent (the estate owes debt). In the first case, the balance of the benefit that the person who passed away did not allocate to a nominee, must be paid into the estate of the person who passed away. In the second case, the estate must first be made solvent by paying in the money necessary to settle the debts. The balance, if any, can then be allocated to the nominees. The benefit will also be paid into the estate or when there are no dependants or nominees.

A nominee will automatically receive the specified portion of the retirement fund benefit if there are no dependants and if the estate of the person who passed away is solvent (the estate owes no debt).

Everyone is unique, and so are their circumstances. It is always best to discuss your circumstances, needs and wishes with a financial adviser who has the full picture of your financial needs, wants and obligations.

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