Just as it’s important to have an up-to-date legally binding Will in place when you pass on so your loved ones will benefit from the legacy you leave, it also matters that you make that legacy as beneficial to them as possible.

Have you ever considered what happens to your investments after you die? Only through knowing and understanding this, can you be sure that the investments you make will be of the most benefit to your loved ones.

This summarises a great article we saw on Moneyweb by Michael Haldane that posed this question and clarified some key points, so let’s see if your beneficiaries will get the maximum benefits when you die…

RAs, pension and provident funds

These make up your retirement funds – and when you’re alive you’re the sole beneficiary but on your passing any funds not accessed become payable as a death benefit. This will be the market value of the investment which will only be determined once all the funds are switched into an interest-bearing fund and all applicable charges have been deducted.

All retirement products are governed by the Pension Funds Act and one of the roles of the trustees is to ensure that your benefits are distributed fairly. This would be determined in order of the level of financial dependency of your beneficiaries.

As the Moneyweb article states “Beneficiaries are entitled to choose whether to receive their benefit as a cash lump sum, use it to purchase a compulsory annuity or a combination of the two. It is a good idea to warn your beneficiaries about the tax implications if they choose to take a cash lump sum.’’ The same applies to…

A living annuity

When alive, this gives you an income and one of the primary benefits of this over a guaranteed annuity is that you can leave the balance of the capital to nominated beneficiaries. On passing, the investment funds are automatically blocked, and the fund value is switched to an interest-bearing fund once all applicable fees have been deducted.

Unit trusts

These funds cannot have nominated beneficiaries but will form part of your estate upon your death with normal death duties being applicable. If paid to a Spouse, there are no tax implications but there can be if paid directly to children.

Tax-free investments

Beneficiaries receive the proceeds upon your death, and you need only remember that tax-free investments form part of your estate but with no executor’s fees.

Endowments

These investments are a useful estate planning tool for investors with a marginal income tax rate higher than 30%. You are the policyholder and must decide who should be the person or people on whose life the endowment is issued. This could be you or others and the endowment expires when the last assured dies.

Only at this time any nominated beneficiary will receive the funds, paid directly to them without the estate being wound up. The endowment, as part of the estate, is subject to estate duty but not the executor’s fees.

Let us take care of your legacy

Whether it is through astute advice on Estate planning or on the investments you make and how to structure them so that your beneficiaries get the maximum benefits when you die, Hereford Group understands that everyone is unique, and theirs and their loved ones circumstances are different.

Talk to one of our knowledgeable, qualified Financial Advisors about structuring the best possible wealth profile for you and your loved ones as you live your life through all its ups and downs, into retirement and beyond the living years, by maximising the benefits of the legacy you create.