What you need to know about employee benefits

Employee benefits are a very important part of every employee’s remuneration package.

This basket of benefits (consisting of Pension Funds, Provident Funds, Group Risk Benefits and or Medical Schemes) is often a popular topic of discussion among colleagues and friends.

However, the discussion seldom gets around to:

• What happens when I die?

• Will my loved ones be taken care of?

• Will my last wishes regarding who gets what be honoured?

• Will my loved ones enjoy the benefits I have worked so hard to earn?

When joining an employee benefit scheme one also receives a Beneficiary Nomination Form.  This is one of the most important attachments to your application.

It consists of clear and precise guidelines to the Trustees of the Pension/Provident Fund explaining how your fund money is to be distributed amongst dependents. It is, however, very important to emphasise that this document will not be the final determining factor regarding who will be receiving what portion of your Pension/Provident Fund values.

Remember, your beneficiary nomination is not one and the same thing as your last will and testament. According to legislation the trustees are required to do the apportionment in accordance with the Pension Funds Act (Section 37Cc).

Although your beneficiary nomination will be taken into consideration, the apportionment of the benefit is still subject to trustee discretion.

You can assist the trustees to assure that your dependents and beneficiaries do not suffer any further undue hardships as a result of delayed payments.

Payouts of Group Life Death benefits are managed according to the beneficiary nominated list, specifically when the said benefit is a non-approved benefit. In other words: if death cover is included in your employee benefits (over and above the pension/provident fund) the death policy will pay out directly to the beneficiaries indicated on you beneficiary form.

What happens if you should die without a beneficiary document and the trustees determine that your death benefits (pension or provident fund as well as Risk Policy) are to be paid into your estate? In this case the last will and testament becomes of inestimable value.

Most people are reluctant to discuss or even plan a last will and testament. We live in the now and we hesitate when confronted with the possibility of unexpected death. Not having a will can lead to traumatic circumstances for those left behind. In some instances it could also be quite expensive.

A worrying indicator is that a large number of South Africans pass on without a will in place; this implies that they have no say in what happens to their estate.

When a person passes on without a will, they forfeit the privilege of deciding what should happen to their estate and the estate is portioned in terms of pre-determined legislated guidelines, known as Intestate Succession.

As mentioned, the rules of Intestate Succession come into effect in cases where the deceased has left no will: The following scenarios could unfold:

1. If the deceased is married in community of property, the deceased’s spouse will receive half of the joint estate plus R250 000 or a child’s portion, whichever is the bigger. The child’s portion is calculated by dividing the remainder of the estate by the number of children and the number of spouses.

2. In the event that there is no surviving spouse, the estate is divided among the children of the deceased. If one of the deceased’s children pre-deceased him/her; the children of the pre-deceased’s child (the deceased’s grandchildren) will inherit that child’s portion.

3. In the event that the deceased passes away in the absence of a spouse or children, the estate is divided equally between the parents of the deceased.

In the above mentioned scenarios, the Master of the High Court will nominate an executor to manage the estate. Being an executor is an extremely important function and one is only allowed to hand pick an executor if a valid will exists.

In addition, and in the absence of clear directives that can only be stipulated in a will, all inheritances for minors (person below the age of 18) will be placed in the Guardian Fund. The Guardian Fund is administered/managed by the Master of the High Court. Funds may only be accessed by the minor for specific limited purposes. The Master has stringent requirements and processes in place to prevent abuse and fraud in this regard.

To conclude

To ensure that your last wishes are adhered to, it is of the utmost importance that both your Employee Benefit Nomination form and Last Will and Testament are compiled and most importantly – are up to date.