Don’t Encourage Ungrateful Brats

Don’t Encourage Ungrateful Brats

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On the other hand it’s just as easy to transform the love and warmth into solid ice. Just omit to mention that they will not inherit the actual capital sum immediately, but a monthly income instead!

Avoid a family feud

You worked for it and therefore have every right to decide how you want your heirs to inherit your money. There are often legitimate reasons for electing the income route rather than the capital lump sum.

In the case of an heir with a reputation for lavish spending, it would be better to have a regular income paid to ensure the money will last for many years.

The answer to these questions (and others) will be found in the word ‘communication’. You need to communicate with your heirs so that all parties fully appreciate what the implications are, and you need to communicate regularly with your financial planner to ensure that your long-term financial objectives still meet all your requirements, and remain that way.

Throughout my career, I have encountered many contentious cases where beneficiaries have ended up fighting over the money someone has bequeathed to them. This can be avoided by communicating openly and candidly about your wishes.

The problem is that legislation governing matters such as inheritances and beneficiaries is often not fully understood by the person nominating  their beneficiaries, and one’s best intentions may not be sufficient to keep everyone at bay.

Sidestepping conflict

To complicate matters, a lifeline often obscures good intentions. Take the young man who affects his first life cover plan: With no heirs to consider at the time, he nominates his mother as the beneficiary on his policy.

 

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He may later get married and if he forgets to review the beneficiary and premature death occurs, no matter what his will may state, the legal right of the beneficiary will usually take precedence over the will and his mother rather than his wife would inherit the sum assured.

The relevant life assurance company is required to pay the money directly into the bank account of the nominated beneficiary just as long as the policy has not been ceded to the bank to cover a subsequent loan.

Retirement benefits

This is not necessarily the case when it comes to retirement benefits. Regardless of whom you nominate as the beneficiaries to your retirement fund benefits, the provisions in Section 37(C) of the Pensions Funds Act require the benefits to be placed in the care of the trustees who have the power to change the proportion of the fund for distribution to each beneficiary if they deem it necessary.

Usually a full investigation has to be carried out before making this determination, but it is the trustees’ responsibility to reallocate the money amongst the beneficiaries, according to their assessment of each one’s needs.

You should include a full review of your estate – and your beneficiaries – as part of your annual review. Circumstances change, and so do your financial planning requirements.

 

Bryan Hirsch
BRYAN HIRSCH has been in the financial services industry for 47 years and is a director of Bryan Hirsch Colley & Associates. He has written two books, the first Bryan Hirsch’s Guide to Personal Finance and more recently, Steps to Financial Freedom. Bryan has written for many of South Africa’s top financial and business publications, has been a weekly guest on Radio SAFM for 18 years, and has his own weekly TV show You & Your Money on Summit TV.