Wills Month: Your Will Does Not Necessarily Decide Who Receives Everything

One of the most important (and often misunderstood) aspects of estate planning is that your Will and your beneficiary nominations do not always govern the same assets.

Certain assets may be distributed through your deceased estate in accordance with your Will, while others may be dealt with according to a beneficiary nomination or specific legislation. This is why your Will, life policies, retirement benefits and broader financial plan should be reviewed together.

What Does Your Will Control?
Your Will generally determines how the assets forming part of your deceased estate should be distributed after your debts and estate administration costs have been dealt with. These may include assets such as:

• Property registered in your name
• Vehicles and other personal belongings
• Bank accounts and cash
• Certain investments
• Business interests
• Other assets that fall into your deceased estate

Your executor is responsible for administering the estate and ultimately distributing the remaining assets according to your valid Will. But not every benefit that becomes payable when you die will necessarily be distributed through your Will.

Life Policies and Beneficiary Nominations
With a life insurance policy, you can generally nominate one or more beneficiaries to receive the proceeds when you die, subject to the terms of the particular policy. Where a valid beneficiary nomination applies, the benefit may be paid directly to the nominated beneficiary rather than being distributed according to the instructions in your Will.

This creates an important distinction. You could, for example, update your Will following a significant change in your family circumstances but forget to update the beneficiary nomination on an existing life policy. The result could be that your Will reflects your current wishes, while your policy nomination still reflects an earlier stage of your life.

The South African Government has specifically highlighted the common misconception that a Will covers everything, noting that retirement benefits and certain insurance policies are subject to separate rules and beneficiary nominations.

Retirement Funds Work Differently Again
Retirement fund death benefits require particular attention because a beneficiary nomination on a retirement fund does not simply operate in the same way as a beneficiary nomination on an ordinary life policy. Section 37C of the Pension Funds Act places duties on the trustees of a retirement fund to identify the member’s dependants and determine an equitable distribution of the death benefit.

Your nomination is therefore important information for the trustees and should be kept up to date, but it does not necessarily mean that the nominated percentages will automatically determine how the benefit is distributed. The trustees must consider qualifying dependants and nominees and apply the requirements of the legislation when making the allocation.

Your Beneficiary Nomination Does Not Simply Rewrite Your Will, and Your Will Does Not Simply Rewrite Your Beneficiary Nomination. This is why these documents should not be considered separately. Changing your Will does not automatically mean that beneficiary nominations on your financial products have also changed.

Likewise, changing a beneficiary on a policy does not update the instructions contained in your Will. They need to be reviewed individually and then considered together as part of your overall estate plan.

When Should You Review Your Beneficiaries?

Your beneficiary nominations should be reviewed regularly, and particularly following significant life events such as:

• Marriage or divorce
• The birth or adoption of a child
• The death of a spouse, dependant or existing beneficiary
• A new relationship or change in family structure
• Changes to your Will
• Taking out new life cover or investments
• Significant changes to your financial circumstances

It is also worth checking not only who has been nominated, but whether the percentages allocated to each beneficiary still reflect your intentions.

Look at the Whole Picture

Good estate planning is not simply about having a signed Will sitting safely in a file. Your Will, beneficiary nominations, life policies, retirement benefits, investments, trusts and available estate liquidity should all form part of the same conversation.

Ask yourself: If I passed away today, would all of these arrangements work together to achieve what I actually intended? Your Will records your wishes. Your financial arrangements should support them.

This content is provided for general information purposes only and should not be considered financial advice. Please consult a qualified financial adviser before making financial decisions.