Knowing that your affairs are in order
gives you peace of mind.
Here are some great tips
regarding reviewing your will in retirement.
So, you have spent years picturing your ideal retirement, and you have planned for this day, and now it has finally arrived, your retirement is here!
While one normally does lots of planning for the financial aspects of retirement, the importance of reviewing your will at retirement is often overlooked. After all, what can be grimmer than thinking about the end of life, whilst it is time to be on vacation permanently? If you read about the psychological impact of retiring from work, one realizes that retirement can be stressful.
The aim of this article is to give you a few tips for reviewing your will on retirement, so that you have one less thing to stress about and that you can relax, knowing that your affairs are in order.
Review your will and get peace of mind
It is normally advisable to review your will when your circumstances change. Retirement is an ideal time to revisit your will and make sure that it is practically enforceable. Let a specialist look at your will and make sure that it is correctly signed by independent witnesses and that it is indeed valid. Involve your financial planner and make sure that there is sufficient provision for liquidity in your estate to pay all debt, costs and taxes, for example estate duty, executor’s fees, capital gains tax and transfer fees if you have immovable property.
Your will has limitations
If you have other financial products, it is of utmost importance to make sure that you know how the product works with regards to the nomination of beneficiaries. If you have a life policy, then you can contractually nominate a beneficiary with the life assurer, and the policy proceeds will pay directly to the nominated beneficiary on your passing away.
However, if you for instance have a retirement annuity policy from which you have not yet retired, Section 37 C of the Pension Funds Act becomes applicable. The crux of this is that the Retirement Annuity will be paid to your dependents and/or beneficiaries in terms of the Pension Funds Act, within the discretion of the trustees of the retirement fund. Your spouse and children (including major children even if they are not factually dependent on you) will qualify as dependents in terms of the Pension Funds Act. Your will is limited in this regard, and it is advisable that you update your beneficiary nomination on your retirement annuity, and not do this in your will.
If you have already retired, and are receiving income from a living annuity, it is important to nominate a beneficiary on the living annuity. The beneficiary will then have various options on your passing with regards to the living annuity, and it is advisable to again get an experienced adviser/broker involved. Living annuities pay directly to the beneficiary that you have nominated on the beneficiary form with the insurer. If you do not nominate a beneficiary on the living annuity, it will be paid into your estate, and that could have the effect that extra costs are incurred like tax payable on the lump sum and executor’s fees. If you however have nominated a beneficiary on the living annuity, the proceeds will not pay to your estate, and would not form part of the winding up of your estate, resulting in savings on executors’ fees and possible income tax. If there is a specific reason why you would want your living annuity to be paid to your estate, it is advisable to get the advice from a specialist in this regard. Only if your living annuity is payable to your estate it would be possible to bequeath the proceeds bequeath it in your will. If a beneficiary was nominated, the living annuity will not be dealt with in your will. It is extremely important to understand how this work to ensure that you don’t incur unnecessary costs and a tax liability.
A legacy to your grandchildren
Be openminded when you want to bequeath an asset to your grandchild that is still a minor. You must think practically about it. For example, it does not make sense to leave your car to your one-year-old grandchild, since he/she needs a driving license for this inheritance. If he/she does not have one, her guardian can receive the bequest on her behalf, but must then keep it until he/she becomes of age to be able to drive the motor vehicle. The same would be applicable if you want to leave your rifle to someone without a firearm license.
Cremation or funeral
You may mention in your will whether you want to be cremated or whether you want to be buried. It is a wish that is recorded in your will. It is however advisable to make sure that your family knows what your wishes are in this regard.
If you have assets offshore that is not an investment or bank account, for example immovable property, it may be advisable to deal with it through an offshore will that complies with the requirements of the foreign country where the asset is held. It is then important to exclude this asset from your South African will, and that your will provides that it is only dealing with your South Africa assets. This will make it easier to wind up your estate in South Africa, whilst the offshore specialists can then deal with your assets in the foreign country.
We trust that this article has given you some food for thought when reviewing your will on retirement, and that it will assist in providing stress relief in that you now know what issues to address.
Make sure to involve your financial adviser, since it is important that your beneficiary nominations on your policies and retirement products are not in conflict with your will as indicated above.
Click here to read more about wills and estate planning from Old Mutual.
Article by Suzelle Jooste
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