Speaking about nominating and considering a beneficiary has to be one of the most difficult conversation to have. Certified financial planner Paul Roelofse discusses the three mistakes to avoid when nominating a beneficiary.
You want to ensure that the right person ends up with your hard earned provisions. The common problem many people face is that as time passes, they forget to revisit this.
It is a common mistake that a lot of us make. We don't go back and revise as things change. As events in our life change , we have to go back to these policies and make sure they are still appropriately nominated in terms of beneficiaries.— Paul Roelofse, Certified Financial Planner
With that being said, here are three mistakes to avoid when nominating a beneficiary.
1) Nominating a child as a beneficiary
Children under 18 years old are minors, they cannot contract and cannot receive the proceeds without a guardian. Your will should take care of this provision for minors and you should rather nominate your estate as the beneficiary in this instance. Be careful to ensure your will is updated and valid as the proceeds for your minors could end up with the Guardian’s Fund which is administered by the Master of the High Court. This can prove to be very restrictive.
The correct way to do it is establish a trust inside your will, nominate a guardian you can trust to look after the kids.
2) Not taking ownership of policies in divorce
What is often overlooked in a divorce are the changes that need to be made on your policies. If the “Ex” is the nominated beneficiary then the proceeds will be paid accordingly. When settling your divorce agreement ensure that the right beneficiaries on your policies are in place. Take ownership of the policies that you settle for so your “Ex” won’t be able to change the beneficiaries without your knowledge. You will also be able to track the payment of the policies as you will be notified if and when payments are not met.
3) Ignoring your group benefits
Group life assurance provided by your employer and your pension should have a nominated beneficiary. In the case of the pension fund, the beneficiary nomination acts more like a “letter of wishes” as the regulations leave the trustees of the fund with an obligation to check if there are any other dependents. The trustees can make the call to allocate the proceeds. Your nomination of a beneficiary will at least act as a guide for the trustees.
Listen to the full audio in the link below...