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 email@example.com. 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
MAYA FISHERFRENCH DEBTBUSTER Omphile is on the road to financial freedom