The allocation of funds to ones beneficiaries varies between the different types of funds and while some attract Estate duties, others do not. In some cases even your last will and testament can be over ridden by trustees of certain types of funds with the emphasis being on the needs of dependents.
Unit Trusts: When taking out unit trusts you will not be asked to nominate any beneficiaries and in the event of your death the value of your unit trusts will form part of your Estate and be subject to Estate duties.
Living Annuities: When you take out a living annuity you will be asked to nominate beneficiaries. In this instance the nominated beneficiaries will receive their share of the value of your living annuity without any Estate duties.
Retirement Annuities, Pension and provident funds: Upon your death it is the responsibility of the trustees of the fund to investigate your dependents, carefully weight up their needs and then to make an informed distribution, the emphasis being on the needs of your dependents. In this case your last will and testament can be over ridden by the trustees after fully investigating the needs of your dependents and allows them to make distributions to dependents on a different basis to what your last will and testament might hold.
The payout period for these types of funds is typically lengthy as a result of the responsibilities of the trustees to determine the individual payouts to beneficiaries.
What is a dependent: Spouse, biological children, adopted children, step children who have been financially dependent on you which needs to be proven. Anyone entitled to maintenance or may have been financially dependent on you while alive.
The Onus on trustees is to determine who all of the dependents are, investigate their financial positions and then to allocate at their sole discretion the proportions to each beneficiary or dependent.
If you have no dependents at the time of your death, then the value is distributed according to your nominations.
Beneficiaries may elect to receive lump sums or to transfer their allocation to a living annuity which attracts no Estate duty.
This demonstrates how important it is to check who you have nominated on each of your retirement fund investments and alter the nominated beneficiaries from time to time where necessary. For an investor who has been investing for retirement for many years and holds multiple policies or funds, this is extremely important.
