A question often received is whether a beneficiary nomination in a policy will take precedence over the last registered will if, for instance, the beneficiary is married out of community of property? Beneficiary nomination in life policies allows you to create liquidity in your deceased estate or provide your loved ones with access to capital after your death.

However, many people are unclear about how beneficiary nomination, such as that in a life insurance policy, works and how it relates a person's last will.

Importantly, the proceeds of a domestic life policy are considered ‘deemed property' –  property that did not exist at the date of death, but which comes into existence as a result of that person's death. In the case of life assurance policies, the proceeds are paid out on the event of death

This means that, should the client have referred to the distribution of benefits of a pension fund, it would be important to note that benefits due to beneficiaries are not assets in the estate nor are they considered deemed assets for estate duty purposes. As such, they are not regulated by the will of the deceased or the Administration of Estates Act.

The freedom of testation is limited by section 37C of the Pension Funds Act. Therefore, the board of trustees of the pension fund is not bound by the wishes of the deceased as expressed in the nomination form. For this specific reason, the death benefit (subject to the exceptions outlined in section 37C) is excluded from the estate of a deceased member and placed under the control of the retirement fund and its regulated taxes.

Even though the board of trustees is not bound by the last Will of the deceased or the nomination form, this does not mean that it is not important to complete such a nomination form. Should no dependents of the deceased member be located, the trustees will look to the nomination form as one of the factors that must be taken into consideration when allocating and distributing a death benefit.

If you have not had an estate plan drafted, or your are unsure of the consistency between you policies and last will, it is strongly advised that you consult a Fiduciary Services expert to ensure that you and your loved ones are adequately provided for in the event of a tragedy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.