Protect your family by keeping them informed

Over the years, I have come across numerous cases of crooked financial advisers who have made themselves beneficiaries of life assurance policies without the policyholders apparently knowing about it.

PROTECT YOUR DEPENDANTS BY KEEPING THEM INFORMED

The Saturday Star, 24 January 2004 by Bruce Cameron

Over the years, I have come across numerous cases of crooked financial advisers who have made themselves beneficiaries of life assurance policies without the policyholders apparently knowing about it. The problem is that after the death of the policyholder, it is very difficult to prove that fraud has taken place.

To my mind this practice should be banned by the life assurance industry, but for some inexplicable reason the industry does not want to do so. There is no way an adviser can claim to have an insured interest in a policy holder to whom he or she has sold a policy. Usually, it is the elderly who are exploited in this manner.

If you name a beneficiary to your life assurance policy, on maturity of the policy or on your death, the benefits will be paid directly to the named beneficiary. The benefits are included in your estate for tax purposes, but not for distribution by your executor.

Naming a beneficiary to a life assurance policy, in effect, creates a mini will. At any stage, you can check on the beneficiary named or change the beneficiary by contacting your life assurance company.

I raise this issue because often people think that they have done everything possible to protect their dependants because they have drawn up a will and had a financial needs analysis done to ensure cash flow to dependants after death.

You need to do more than this. You need to put together a file that is made up of all your vital statistics. The file should be kept in a safe place and someone you trust must know where to find the file. Preferably you should give one copy to a relative or spouse and another to your proposed executors.

Apart from providing greater protection against fraud, it will also help your executor wind up your estate more quickly. If an executor has to go on a long paper chase looking for your assets and liabilities, there can be significant delays in the payment of benefits to dependants.

YOUR VITAL STATISTICS

  • You personal file should contain:
  • Your will
  • Your birth/marriage/divorce documentation
  • A Certified copy of your identification book (the page with your mugshot and identity number)
  • A list of all your assets including:
    • Fixed property details. This should include the erf number and address and a record of who holds the title deeds.
    • Investments. This must include a full description of your investments, with all reference numbers and copies of certifications.
    • Life assurance policies. This includes policy numbers and who has been named as beneficiary. If fraud has been committed by anyone, this will help your dependants recover the money. However, you need to record the details of other reasons as well and not only because of fraud. If your dependants do not know that you have a particular policy and the life assurance company does not know that you have died, the policy will not be paid out.
    • It is advisable to photocopy the policy and the beneficiary nomination forms. You also need to record where the original policy documents are. For example, in some cases the documents could be in the hands of a financial institution if you have a loan, such as a mortgage bond. The life assurance company will want the original documents before it pays out.
    • Retirement funds. You must record the fund name and your membership number. Preferably, you should also include any beneficiary nominations you have made. If you have not nominated beneficiaries and declared all your dependants to your fund, you should do so now.
    • Ownership of any business. Provide full details of the ownership.
    • Any other assets, with as much detail of where they are located.
  • Valuations of all your assets as at October 1, 2001 for capital gains tax (CGT) purposes. Death is a CGT event. The tax will apply on any capital growth, less exemptions, in your assets between October 2001 and the date of your death. Exemptions include the first R1 million gain on your primary residence and R50 000.00 on any other gains in the year of your death.
  • A list of your major liabilities, such as a mortgage bond. It is also wise to keep a list of companies to whom you pay regular amounts. I have heard that some companies, which may have done business with you in the past, submit fraudulent claims against an estate, claiming that the amount has not been paid in full. So, keep receipts for all least three years, after which the claims will fall away.
  • A copy of your most recent tax return.
  • The name of your employer and any employment benefits to which you are entitled on death (for example, group life assurance, outstanding leave and pay). You should also include any special financial arrangements which your executor needs to be aware of.

This is not a task to be left until retirement. This is something everyone who has any assets should do. This information should be updated every year, or at least when there is a significant change to your personal life or your financial circumstances.