Make sure the right people get paid out when you die
Published on 2nd April, 2020 at 11:12 am
If you’ve got a death benefit through your employer, how do you make sure your loved ones get paid out when you die? Find out, here.
If you’ve got a death benefit through your employer – for example, a group insurance policy underwritten by an insurer like Sanlam Group Risk – it’s critical that your employer and insurer knows who you would like to benefit from the policy when you pass. These are the people who should be paid out when you die.
How do you nominate your beneficiaries?
A beneficiary nomination form is a form on which you, the employee, indicate to whom your death benefit must be allocated. You also indicate the percentage to each individual, if more than one person is nominated. This form informs your employer, and your insurer, of the people you’ve nominated. It’ll assist in the process of allocation and settling of the benefit.
Most types of death benefits request that you nominate beneficiaries as part of the sign-up process. However, you may have done that a long time ago – and things can change. The surest way to tell your employer or the trustees of your pension/provident fund who you would like to benefit from your policy after your death, is to ensure your beneficiary nomination form contains your latest family information.
What’s the difference between a dependant and a beneficiary?
| A dependant | A beneficiary |
| According to the Pensions Funds Act a dependant is:
· Any person for whom you are legally responsible for maintenance. · Any person for whom you were not legally responsible for maintenance, but was, in the opinion of the Trustees, in fact dependent on you for maintenance at the time of your death. · Your spouse, including a party to a customary or civil union. · Your children, including a child born after your death, an adopted child and an illegitimate child. · Any person for whom you would have been legally responsible for maintenance if you had not died. |
You may nominate (in writing) any natural person or more than one, to receive your death benefits. This person(s) is then known as your ‘nominated beneficiary’.
Your nominated beneficiary can include a dependant or any other person (even if they do not necessarily depend on you financially). |
How often should you update your beneficiary form?
Upon your death, your employer or the trustees of your pension/provident fund will need to know who your dependants and beneficiaries are.
It’s important to update your form whenever anything changes in your life. For example, if you get divorced, you may no longer wish to list your ex-spouse as a beneficiary. Or, if you get married, or following the birth or adoption of a child, you may wish to list your spouse and/or child’s name as your beneficiary/dependant.
It’s also important that your employer and/or insurer can get hold of your beneficiaries after you pass, so that they can benefit from your policy. Update your nomination form should their contact information change, too.
Set a reminder in your calendar to review this annually if you’re worried you’ll forget. The form can be obtained from your HR representative (employer), and the updated information will be kept on record by your employer, and provided to the insurer at claim stage.
I haven’t nominated anyone – what happens to my death benefit when I die?
If you didn’t complete a beneficiary nomination form, the group insurance benefit will be paid to your estate, resulting in a delayed pay-out to any eligible dependants identified during the settlement of your estate.
In contrast, if you belong to a fund, the Pension Funds Act places the duty on the trustees of the fund to find and identify all of your dependants and nominated beneficiaries. They will have to use their own discretion to allocate and pay your benefit according to limited (and possibly outdated) information they may have if the beneficiary nomination form is not recent.
In need of expert legal help, at no extra cost you? Reality Club and Reality Access for Sanlam Group Risk members enjoy free access to 24/7 legal experts over the phone, as one of their benefits. Learn more about it here.
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