Blind spots of estate planning
WHEN we land a new job, there are a number of forms we sign, which may include those of retirement and beneficiaries.
We may read through the documents, but some of us do not think much about them before signing.
One of the mistakes we make is to allocate a 100% payout to our offspring without giving much thought as to what would happen to them should we die before they have matured enough to inherit what is due to them.
Consumer Line has received complaints from beneficiaries who cannot go to school because their inheritance is locked in a trust account until they turn 21 and so on.
Noluthando Sithole, 12, is a victim of such a case.
Her grandmother, Thoko, has enlisted Consumer Line's assistance on a matter before Absa, the administrator of Noluthando's trust account. She wants to know if Absa could consider paying her a monthly allowance for her grandchild's upkeep.
Noluthando's late mother, Nomonde, nominated her daughter as the sole beneficiary of her estate should she die.
Nomonde had a right to update her nomination form, but kept postponing until it was too late.
Thoko said her daughter told her she would update her forms and promised to allocate 30% of her estate to her mother's name, but that never happened.
Thoko, who is a pensioner, has to share her meagre government grant with her grandchild even though there is more than R150,000 kept in a trust for the child.
She says: "It is a good thing for parents to nominate their children as beneficiaries, but that is not in their best interest if they cannot access it until they have matured."
Thoko reveals that her granddaughter is an orphan.
"Her father was killed in a car accident in 2009. I am the only one left to take care of (her) with only R1,900 to live on," Thoko says.
She says Noluthando's transport cost adds up to R350.
"I also spend about R400 for her lunch monthly. That excludes her monthly food costs and other living expenses," Thoko says.
"Where will I be by the time she reaches high school or turns 21?"
Thoko says those are some of the pitfalls that arise out of parents not thinking about how their children's future will be affected when they select a beneficiary.
Consumer Line spoke to Alexander Forbes' Sheryl Naicker, who agreed to help Thoko.
Alexander Forbes administered Nomonde's provident fund before its proceeds were transferred to Absa, which now administers Noluthando's trust account.
Naicker said: "I have explained the working of the trust fund to her [Thoko] and she is welcome to bring her budget on behalf of the minor along, so that we can work out the best available option to assist her with the minor's general maintenance needs."
Naicker says they cannot help financially with everything Thoko wants, but will as far as possible "stand in for the deceased's part according to the value of capital and the duration of the fund".
She says Alexander Forbes does not decide on how the estate's benefits are to be split. That is determined by the death claims committee, which is made up of the trustees of the fund's employer, after a thorough investigation is done regarding all beneficiaries.
Naicker says when that process is done an instruction is then sent to Alexander Forbes on a signed resolution to action payment.
- The moral of this story is do not be like Nomonde. Always update your pension fund or beneficiary designation forms, especially after life-changing events such as divorce, marriage or childbirth.
If you do not, you might end up leaving your loved ones with huge financial responsibilities.
Remember that estate planning is a lifetime process.