Know Your Money with Bronwyn Waner and Craig Finch
Know Your Money with Bronwyn Waner and Craig Finch
138. Why Beneficiary Nominations Really Matter
Who gets your money when you die? The answer might surprise you—and could devastate your loved ones if you haven't properly structured your beneficiary nominations. In this eye-opening discussion, we unravel a critical financial planning topic that affects everyone with life insurance, investments, or retirement accounts.
Many people mistakenly believe their will controls everything, but certain assets transfer completely outside your will based solely on beneficiary designations. We walk through real-life scenarios where outdated beneficiary nominations have directed substantial assets to ex-spouses or siblings instead of current partners and children—all because someone forgot to update a form they completed years ago.
Beyond the basics, we explore advanced strategies for complex family situations. Learn how to use beneficiary nominations strategically in blended families or when maintenance agreements complicate matters. We dive into the crucial concept of alternative beneficiaries—what happens if you and your primary beneficiary die simultaneously? Without proper planning, your assets could end up in unexpected hands. We also discuss the importance of liquidity planning to ensure your estate has enough cash to handle immediate expenses without forcing loved ones to sell assets at the worst possible time.
This conversation might seem uncomfortable, but it's absolutely essential. Your financial legacy depends on getting these details right. Take the time to review your beneficiary nominations today—your family will thank you for preventing the confusion, delays, and potential heartbreak that comes from overlooked planning. Connect with a qualified financial planner to ensure your assets will transfer exactly as you intend.
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hello everybody, welcome to know your money.
Speaker 2:I'm bronwyn weiner and I'm craig finch and we are from growth financial planning.
Speaker 1:We hope you enjoy our podcast hello everybody, welcome to know your money. We wanted to talk about beneficiary nominations and alternative beneficiary nominations. We have spoken about it before, but it is so vitally important just to grasp the concept. So, Craig, do you want to explain the difference between beneficiary nomination in your will and beneficiary nomination on a policy?
Speaker 2:A good point there, warren, thank you, you're so confused. Yeah, bronwyn, so your will could say everything. If I pass away goes to my wife and you bought a policy way back Life policy, a life policy, yes, or an endowment policy. You're investing for a future goal, yes, or an endowment policy. You're investing for a future goal. And you've got an endowment policy that has a beneficiary nomination on it and you took it out when you just started working. And when you took it out, you made your sister your beneficiary, because that was the most important person in your life. And now you've got married and now you haven't reviewed your policies. If you pass away away, all your assets, according to your will, will go to your wife, but that life policy or that endowment policy or even that, yeah, the mostly those two, will go directly to your sister. So it's very important to have a look at the whole picture. It's all good and well having all these policies in place and people say, yeah, you've got to.
Speaker 2:And people say, you know they're in place to cover for certain events, but you must dig deep and know that their beneficiary nominations have to be accurately recorded. So an endowment policy or a life policy will be separate to the will. So whatever your will says will happen. But whatever that life insurance policy says is the beneficiary or the endowment policy says is the beneficiary, will go to that beneficiary. So the endowment policy is that five-year plan yes, that's a structured five-year plan. You can have a lump sum or you can have a monthly and even you're tax-free with certain companies, have a nomination of beneficiary and you can make that separate to your to your will. So in other words and that's quite a useful thing to to do that so some families have complications because there's a second wife involved and there's children and or maintenance agreements, agreements exactly and that, and say, well, I've got an older child and that child is out the house not living with us.
Speaker 2:My new wife and the little kids need to get all my assets but I'd like to leave that older child something if I pass away. But I don't want that complicated with my will Because then the wife, the new wife, might say, oh, my word, I'm not going to give you a child Now. There might be complications and emotional things, so you could make an endowment policy or life policy that beneficially could be that other child. So it would pay directly to them, not to the other.
Speaker 3:If, if on your will you explicitly stated um all of my known policies shall go to this person, does that supersede if you took the actual policy?
Speaker 1:out for somebody else. Beneficiary nomination supersedes on the life, on the actual policy itself, always right, so you can't just be lazy at the end and go.
Speaker 3:I just want all of them to go to yeah, and also nominating a child.
Speaker 1:You know you've got to watch that you may need to nominate the mother of that child If they're under 18. Yes if they're under 18. And then we did speak in last week's episode about retirement annuities. You do put a beneficiary nomination on, but 37C Ah, that one, yes, yes, but it may not pay to who you said it's going to pay, it's going a beneficiary nomination on, but 37C oh that one, yes, yes.
Speaker 2:Yeah, that it may not pay to who you said it's going to pay. It's going to pay to the dependent, yeah, but the endowment policy and a lot of the tax freeze and the life policy will pay directly to the beneficiary you nominate. So that's also important with. You know, the business assurance stuff which we'll speak about at some stage. But the point is you need to look carefully at who you nominate as beneficiary, especially for old policies or, as your circumstances change. That should be a discussion point with your financial planner.
Speaker 3:Can you only have one life policy on yourself?
Speaker 1:No.
Speaker 3:So you could effectively have if you have two kids and a wife, you could decide that you wanted to. You could have three life policies that pay out to each other and even on that life policy you can have more than one beneficiary.
Speaker 1:So let's say it's 3 million rand, you can say 33% to my wife, 33% to the estates and 33% to my 25-year-old child, so you can break up that nomination. And then a good point to that is um on the endowments, and I'm not sure if it's on some of the life policies, but you can have an alternative beneficiary, which is such a useful thing to do and and we would recommend doing that all the time, so if it's not my wife, this is who I want the beneficiary to be on that policy.
Speaker 3:Would that be put in place if your wife passes at the same time?
Speaker 2:Yes, Is that why it's?
Speaker 3:if it's not, very good point it's not just yeah, it's not gonna be her anymore.
Speaker 2:Yeah, yes. So I've got this endowment policy. It might be an international endowment, it might be a local endowment policy. If I pass, it goes to my wife, but if we're in the airplane together, then who does it go to? It goes to, and then you can nominate, say, your children or somebody else, as the alternative beneficiary. Very good idea to do that.
Speaker 3:I don't know if it was a policy or if it was one of the Alan Gray funds, but the lady who worked for Alan Gray who came on talked about having an alternate Candice. Yes. Candice yeah, she talked about having an alternate death. Yes, candice, she talked about having an alternate death.
Speaker 1:Yes, very important. Yeah. And then also just another note on the alternative beneficiaries is in your will. So you know, often we plan for, in the event of my death, everything must go to my wife. If we both pass away, it must go to my children or into a trust for your children. But God forbid what happens if all four of you go. So the thing that would happen is it would go per stripe, so like it would either go up to your parents or to your brothers and sisters, which is fine, but it can be complicated, but it's always quite a good idea to have that next level in. So if it was all of us, then what? What's that alternative beneficiary?
Speaker 3:And you can write that into it.
Speaker 1:Yes In your yeah. Own your will In your will. Yes, not in the policies.
Speaker 3:I was going to say yeah because you can only have the alternate in the policy. You can't have like 15.
Speaker 1:Yeah, no, exactly, and that's why we also say like sometimes with the beneficiary nomination, make your estate a little bit of the beneficiary depending. So when you go to do… yes, when you….
Speaker 3:Well done for remembering guys.
Speaker 1:I told you I'm learning yeah, when you go to a planner, they do a financial needs analysis for you so they tell you what you need if you pass away. They tell you what you need if you're sick, etc. Etc. But what they also do, if you give them all the information, is a liquidity analysis. So if you, kirsten, spoke about it in our legacy protection plan, these, these unexpected costs that you don't think about, the legacy protection plan can cover that, but so can a life policy if you nominate the estate as a beneficiary so so would that have to be.
Speaker 3:Could you do that in the multiple nominees? So, in a single life policy. You say, okay, wife's going to get 50, kid's going to get 25, and I want 25 to go to the estate.
Speaker 1:Absolutely yes, and the liquidity analysis that you do with your financial planner can say okay, you need a million rand, for example, let's just do this legacy protection plan. Or leave a million rand, for example, let's just do this legacy protection plan, or leave a million rand just to the estate, and then it just doesn't cause unnecessary drama.
Speaker 2:It's so much better. If the wife doesn't get all the money, then she's got to pass it on to one. The estate up. It's already paid. She doesn't have to worry about it Because it's already traumatic.
Speaker 3:Yeah, yeah, yeah.
Speaker 2:So I think the important thing you brought up here is that when you do your planning, you look at your beneficiary nominations, make sure that they're all sorted out do you have any other questions?
Speaker 3:no, that was pretty cool, though I liked that one thanks everybody have a good day, cheers thank you for listening.
Speaker 2:If you have enjoyed this podcast and would like to subscribe, please visit our website wwwgrowthfpcoza. The information we have provided in this podcast is our personal opinion. For more detailed information, please discuss your financial situation with a financial planner.