The importance of revising the nominated beneficiaries on policies, retirement funds and your Will on a regular basis cannot be underestimated. These are your last wishes to your loved ones who are often people who are dependent on your income and support. It is vital to understand that a Will does not supersede beneficiary nominations on policies and retirement funds.
The best way to highlight the implications and complications of not revising your wishes on a regular basis is by the following example:
Mr and Mrs X were married and had three children. After 15 years they decided to divorce. Mrs X revised her Will to stipulate all her assets were to be left in trust to provide for her three children. She never revised her retirement fund and life policy beneficiary nominations which still reflected Mr X, her now ex-husband, as the nominated beneficiary. Mrs X assumed her wishes in her Will would supersede any other beneficiary nominations.
Mrs X remarried a few years later and had another child with her new husband, Mr Y.
In the event of her death:
Her life policy proceeds will be paid out to her ex-husband Mr X who is now happily remarried and not a dependent of Mrs X.
Her retirement fund proceeds will be allocated to those who are currently her dependants; in all instances the trustees of a retirement fund have the authority to override the nominated beneficiaries. In this instance her new husband, all four of her children and other dependants such as elderly parents will be taken into consideration for the proceeds of the retirement fund.
Her Will stipulates that a trust should be created to provide for her three children from her first marriage only. The fourth child or guardian of the fourth child can lay a claim against her estate for maintenance; so can any other dependants.
Should Mrs X neglect to have or elect not to have a Will and also not to nominate beneficiaries on her policies and retirement funds, theresult will be:
- All her assets, besides the retirement funds, will be allocated to her estate and all dependants will be taken into account for the distribution of the said assets. The benefits accruing to minor beneficiaries will vest in the Guardians Fund of the Master of the High Court, which may lead to administrative pitfalls.
- The trustees of the retirement funds have one year in which to find all dependants and will distribute the assets proportionately.
This option is not advisable as it is extremely time-consuming, costly and very traumatic for family and loved ones.
To avoid any emotional family feuds, additional costs and delays in providing for those you care for, it is crucial to revise all your policies, retirement funds and your Will regularly.
For assistance with drafting or revising your Will, please contact Personal Trust directly.