How will your death benefits be distributed when you die? Be sure to make a will
What you and your employees need to know about the distribution of death/group life benefits when an employee dies.
Although the Covid-19 pandemic has increased our awareness around death and the administrative and financial burden that surrounds the passing of a loved one, the Master of the High Court still estimates that 70% of South Africans do not have a legally executable will, says Mandy Wiener.
If you don’t have a will or do not understand the process of distributing death benefits, your loved ones may be left in great financial confusion, disarray, and conflict in their time of need she adds.
This National Wills Week, Mandy speaks to Shameer Chothia, Senior Consultant at Momentum Corporate Advice and Administration, to clear up confusion and highlight why it’s so important for employers to help create awareness around these issues.
If an employees’ benefits are not dealt with in their will, who decides how these benefits are distributed?
An employees’ death benefit is usually their retirement savings balance, plus a multiple of their annual salary if an employer has included this in their employee benefits.Shameer Chothia, Senior Consultant - Momentum Corporate Advice and Administration
He says that Section 37C of the Pension Funds Act makes it very clear how these benefits are distributed.
The key thing employers and employees need to know is that they do not form part of the assets in a deceased employee’s estate.Shameer Chothia, Senior Consultant - Momentum Corporate Advice and Administration
Section 37C of the Pension Funds Act requires the trustees of the retirement fund to identify the dependants and nominees of the deceased employee and, allocate and pay the benefit fairly and equitably.
It is so important to make sure you keep your beneficiary nomination form up-to-date.
The trustees of your retirement fund will first ensure that your dependents are taken care of financially, before considering your nominated beneficiaries.Shameer Chothia, Senior Consultant - Momentum Corporate Advice and Administration
What is the difference between how approved and unapproved death benefits are distributed?
Chothia explains that approved benefits are where the death benefit is provided through your retirement fund and the trustees decide who it is paid to, in terms of the Pension Funds Act Section 37C process.
How to spare loved ones unnecessary financial stress and confusion when one dies
Talking to your loved ones about your benefits and making sure all essential information is in one safe place is key.Shameer Chothia, Senior Consultant - Momentum Corporate Advice and Administration
To make this easier Momentum has developed a Smart Life file, which offers guidelines for safely storing personal information like assets, contracts, accounts details, important passwords, and pins – all critical information for your loved ones should you pass away.
This guideline is available to anyone through the Momentum website.
Also don’t forget your other assets, like a house or personal possessions and savings he says.
A will is an absolute must-have to make sure these assets are distributed according to your wishes.Shameer Chothia, Senior Consultant - Momentum Corporate Advice and Administration
Your financial adviser or a professional from Momentum Trusts can offer invaluable advice around financial planning and the preparation of a will, says Shameer Cothia.
If there is no will in place these assets will be administered and distributed by the Intestate Succession Act, which means the government will decide how these assets are distributed and an already complex process will become far longer and a lot more complicated.Shameer Chothia, Senior Consultant - Momentum Corporate Advice and Administration
Use the Smart Life file to keep your financial affairs in order. Download it here.
Contact your financial adviser or Momentum Trusts for advice around financial planning and preparing a will. https://www.momentum.co.za/momentum/personal/products/momentum-trust