/ 10 February 2011

Why you need to get your affairs in order

Nobody wants to think about death. I find it morbid that my mother has files in her cupboard detailing absolutely everything I need to know in the event of her death; but I’ll be grateful for her methodical, meticulous notes one day.

Research conducted on behalf of the Association for Savings and Investment South Africa (Asisa) last year shows that the average South African income earner is underinsured by R600 000 in the event of death and by R900 000 in the event of disability. This means that, in addition to dealing with the loss of these income earners, more than 212 000 families will face unexpected financial hardship this year.

Peter Dempsey, deputy CEO of Asisa, offers these tips on estate planning:

  • If you currently do not have life or disability insurance cover, meet with a financial adviser. Find out what the right level of cover is. How much can you afford to pay in premiums? How many dependents do you have? Do you have debts? All these things needs to be factored in to your plan.
  • If you have life insurance, review your cover. Don’t underestimate how much life and disability cover you need.
  • Have you completed a beneficiary nomination form for your life policies? If you don’t specify a beneficiary, your life insurance proceeds form part of your estate. Since your bank accounts will be frozen when you die, your family will have to wait for some time to receive money — and that only once your debts have been repaid by your estate.
  • If you’ve nominated a beneficiary, the life insurance company will pay out within days, provide the necessary documents have been submitted and no foul play has been suspected in the cause of your death.
  • If you have previously nominated a beneficiary, ensure that this is still in place and that you are still happy with your nomination.
  • The trustees of all pension funds and retirement annuities (RAs) have to abide by Section 37C of the Pension Funds Act, which states that the trustees of a retirement fund must consider all dependents, together with nominated beneficiaries, when allocating the death benefit. So when you nominate beneficiaries, make sure you name everyone who’s financially dependent on you — even an ex-spouse. This will speed up the process and make sure that everyone continues receiving financial support.
  • Don’t die without a will. This will mean endless, unnecessary complications for your family. Your financial adviser, lawyer, bank or life insurer can advise you here.
  • If you have children, think about what would happen to them if you and your partner were killed at the same time. This will affect your beneficiary nominations.
  • Make a list of people to contact if you should die — your financial adviser, broker and so on. Provide policy numbers and details of investments. Also list bank accounts, medical aid details, short-term insurance details, debts and so on. Does your family know where to find this list? If it’s on your password-protected computer, print it out and make sure it’s in a safe place and your family knows where to find it.
  • It may be a good idea to have an up-to-date list of your assets and liabilities, as well as details on where they’re held and what their values are.
  • Tell your children how important financial planning is. Involve them in the process and teach them as you go along. It’s not morbid at all — it’s commonsense. But make sure they’re old enough; minor children don’t need to be draw in.

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