Who gets my ben­e­fits if I die?

The #MoneyMakeover com­pe­ti­tion is be­ing run by City Press in part­ner­ship with fi­nan­cial ser­vices com­pany Mo­men­tum. Over a year, six can­di­dates are striv­ing to save money and reach their fi­nan­cial goals. Each has been part­nered with his or her own fi­nan­cia

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As part of the #MoneyMakeover com­pe­ti­tion, our con­tes­tants have been re­view­ing their wills and en­sur­ing that their de­pen­dants are taken care of should some­thing hap­pen to them. start­ing point is to find out what ben­e­fits your em­ployer of­fers. What will hap­pen to your re­tire­ment ben­e­fits if you die, and how much life cover is pro­vided?

As the Mo­men­tum ad­vis­ers dis­cov­ered, the can­di­dates, like many em­ploy­ees, have lit­tle knowl­edge about their em­ployee ben­e­fits.

It is im­por­tant to un­der­stand what ben­e­fits will be paid should you die, be­come dis­abled or sick, or even re­tire.

Ru­ral devel­op­ment worker Dipolelo and he­li­copter pi­lot Om­phile, to­gether with their ad­vis­ers, ex­pe­ri­enced that it is not al­ways easy to ac­cess this in­for­ma­tion. It is def­i­nitely worth ob­tain­ing your ben­e­fit state­ment from your hu­man re­sources de­part­ment or your com­pany’s in­ter­nal web­site. The ben­e­fit state­ment will clearly show whether there is a lump sum or monthly pay­ment that will be made should you die.

The ben­e­fit state­ment led to mean­ing­ful fi­nan­cial dis­cus­sions be­tween Dipolelo and his ad­viser, Mashiase, par­tic­u­larly around his fu­ture plans to start his own land-sur­vey­ing busi­ness. When start­ing your own busi­ness, the cover pro­vided by your em­ployer falls away.

In some cases, how­ever, a com­pany may al­low you to main­tain this cover at a monthly pre­mium with­out hav­ing to un­dergo ad­di­tional un­der­writ­ing, such as blood tests or health ques­tion­naires. Dipolelo now has time to start plan­ning for his fu­ture by con­sid­er­ing op­tions and sup­ple­ment­ing his re­tire­ment fund­ing with some­thing like a pri­vate re­tire­ment an­nu­ity.

What is also im­por­tant to know is that your re­tire­ment funds and life cover do not form part of your will, so you need to con­sider these sep­a­rately.

Your will does not dic­tate what will hap­pen to your re­tire­ment funds. This is left to the dis­cre­tion of the trus­tees of the re­tire­ment fund. Ac­cord­ing to sec­tion 37C of the Pen­sion Funds Act, trus­tees have to in­ves­ti­gate the claims of any­one who re­lies on you fi­nan­cially, ir­re­spec­tive of your wishes stip­u­lated in a will or in your fund ben­e­fi­ciary nom­i­na­tion form. This could in­clude, for ex­am­ple, young chil­dren, a spouse or el­derly par­ents.

This is to en­sure that any­one who is de­pen­dent on you fi­nan­cially is not left des­ti­tute should you die, even if legally you were not re­quired to sup­port them fi­nan­cially.

Om­phile and Dipolelo sup­port their fi­ancées fi­nan­cially. Even though their part­ners are not le­gal de­pen­dants at this stage, be­cause they are not mar­ried, the trus­tees could con­sider them to be factual de­pen­dants and could al­lo­cate a por­tion of the re­tire­ment funds to them.

Dipolelo’s son would be con­sid­ered a le­gal de­pen­dant and, given his young age, the trus­tees would con­sider how many years he would re­main a de­pen­dant and al­lo­cate re­tire­ment ben­e­fits ac­cord­ingly. As his fi­ancée has the po­ten­tial to earn an in­come, the trus­tees may al­lo­cate a greater por­tion to their child.

In the case of a sin­gle per­son, such as com­mu­nity Have you planned your es­tate? Share yours tips with us. SMS the key­word ES­TATE and your thoughts to 35697. You can also email us at trend­ing@city­press.co.za. SMSes cost R1.50. Please in­clude your name and prov­ince TUMELO phar­ma­cist Tumelo, the trus­tees would con­sider how much she sup­ports her par­ents and sib­lings. As Tumelo’s only fi­nan­cial sup­port is to­wards her sib­lings, it is pos­si­ble that they would re­ceive her re­tire­ment ben­e­fits.

Un­like your re­tire­ment ben­e­fits, trus­tees can­not over­rule the de­ci­sion of the mem­ber on how to al­lo­cate life ben­e­fits. The money will be paid to whomever you have nom­i­nated, so it is im­por­tant that you keep this form up to date to en­sure it re­flects your wishes. If there is no ben­e­fi­ciary nom­i­nated, the money will be paid into your es­tate.

This al­lows you to make ad­just­ments to how your loved ones will be pro­vided for when you die. For ex­am­ple, now that Tumelo knows that her sib­lings would most likely be con­sid­ered as factual de­pen­dants by the trus­tees, she could se­lect her par­ents as ben­e­fi­cia­ries of her life cover. Dipolelo and fi­nance di­rec­tor Iz­i­man­gal­iso could nom­i­nate their chil­dren as ben­e­fi­cia­ries of their life poli­cies to pro­vide for their ed­u­ca­tion. Life cover can be a rel­a­tively in­ex­pen­sive way to re­duce fi­nan­cial pres­sure on your fam­ily should you die, be­cause it is paid out quickly and is not sub­ject to es­tate duty or red tape. Cover your debts: The first cru­cial ques­tion is whether you can set­tle all your debt (li­a­bil­i­ties) should some­thing hap­pen to you to­day. The rea­son for this is that your house or car would need to be sold if your es­tate is un­able to cover the out­stand­ing bal­ance. Life cover is of­ten used to make sure that at least your debts are cov­ered. It is im­por­tant to note that your life cover can ei­ther be payable to a ben­e­fi­ciary or into your es­tate. Apart from Tumelo, all our con­tes­tants have mort­gages and they need to en­sure that there is sep­a­rate cover to set­tle this debt im­me­di­ately. Cover the cost of death: A lot of peo­ple are sur­prised by the ad­di­tional costs that a death in the fam­ily brings about if proper es­tate plan­ning has not been done. Ex­am­ples of this are ex­ecu­tor fees (charged to fi­nalise the es­tate) and fu­neral costs. These un­planned costs of­ten lead to high-in­ter­est loans be­ing taken out. One of your wishes for your fam­ily may well be that they need not in­cur any ad­di­tional debt when you die. All the can­di­dates have fu­neral cover, but they may need to have ad­di­tional cover for ex­ecu­tor fees. Cover ed­u­ca­tion costs: As part of their fi­nan­cial plan­ning, Dipolelo and Iz­i­man­gal­iso’s ad­vis­ers have cal­cu­lated how much life in­sur­ance they need to have to pro­vide for their chil­dren’s ed­u­ca­tion. This is es­pe­cially im­por­tant for Dipolelo be­cause, un­like Iz­i­man­gal­iso, whose hus­band is a joint provider, his fi­ancée does not cur­rently work and he needs to en­sure that there are enough funds to sup­port his son un­til his grad­u­a­tion. IZ­I­MAN­GAL­ISO

PHOTO: LER­ATO MADUNA

MAYA FISHERFRENCH DEBTBUSTER Om­phile is on the road to fi­nan­cial free­dom

DIPOLELO

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