Nominating beneficiaries ensures that the people you care about receive your hard-earned funds. PHOTO | FOTOSEARCH
What you need to know:
Identify right people to take over savings and investments after your death.
Where will your financial assets go to when you pass on? Do you remember who you listed as a beneficiary in the various accounts you hold? Your bank accounts, insurance policies, personal pension plans, annuities and a host of other assets?
Most people opened their first bank accounts while still in college or university when the lender’s marketing teams visited their campuses to recruit new customers. When filling the forms, they may have listed their parents, siblings or both as their beneficiaries.
The same may have also happened when they started their first jobs and took out life insurance policies. Being young and with minimal responsibilities, they again named their parents, siblings, a friend or a love interest as their beneficiaries.
A beneficiary is an individual who by law will receive all or a portion of the proceeds of those accounts when you pass on and therefore, should be carefully selected. It is the quickest and most efficient way to get your lifelong savings and investments into the hands of the right people after your death.
Therefore, it is important to ensure your beneficiary information is accurate and up to date. You may now be married with kids but your beneficiaries are those that you listed when you were single and this does not match your current status.
The same could occur in cases where you no longer want those you listed as your beneficiaries to remain so.
An important thing to remember is beneficiary designations override your will meaning that whoever is named as a beneficiary on the various bank and other financial assets you hold is the person who will receive those specified assets.
This eliminates any confusion with your next of kin and reduces and delay the transfer of whatever funds are in those accounts to your family.
This is particularly important when it comes to life insurance, where the main aim is to provide resources for a particular purpose, such as to help cover funeral expenses or to replace income.
You can update your beneficiary list by getting in touch with the financial institutions or insurance companies where you hold these financial assets. You have worked hard for your money and you would not want your dependents to suffer when you are gone because you failed to keep your records up to date. Update your beneficiary list and have peace of mind knowing that the people you truly care about will be the recipients of your funds.
Under the Retirement Benefits Authority regulations if you are a member of particular pension scheme the rules provide that on the death of a member the benefits payable from the scheme shall be paid to the nominated beneficiaries. The regulations go a further step by giving the following discretionary powers to the trustees of the pension scheme:
• The amount of retirement benefits payable to a nominated beneficiary.
• The amount of benefits payable to the children of a member.
• The apportionment of a lump sum benefit amongst all dependants.
• The reinstatement of a surviving spouse’s retirement benefit that had ceased on re-marriage.
Therefore, the expectation is that if a member has not nominated any beneficiaries, the trustees have a duty to act in the beneficiaries’ best interest.
We have seen scenarios where the trustees’ decisions have been contested at the RBA and this causes unnecessary delays in the payment of the benefits.
The key question we should ask ourselves is why we would let other people decide who is paid our hard earned savings? Take charge and have the final say on who benefits from your savings.
