30/10/2020
As we wrap up Wills Week 2020. Let us look at aspects of Estate Planning and Retirement Funds.
Did you know that your pension fund, provident fund, pension and provident preservation fund and retirement annuity fund do not form part of your estate upon your death? Yes that is indeed so. In terms of Section 37C of the Pension Funds Act 24 of 1956 the trustees of your pension fund have the discretion to decide whether the nominated beneficiaries should inherit or not.
Members of Pension Fund Schemes are required to complete a nomination form, which is not binding on the trustees. The Act places a duty on the trustees of the fund to allocate and pay the benefit in a fair and equitable manner. The trustees cannot merely proceed on the basis of the nomination form. This means that the trustees must conduct an investigation to identify persons who fall within the ambit of dependents as defined in the Act.
The trustees must also determine the needs of the dependents so that they are able to make a fair and equitable distribution of the funds. It simply means that if one of the dependent’s needs, as identified by the trustees is more than of the other dependents, that dependent will receive a higher percentage of funds from the Fund. This is regardless of what the member has provided for in the nomination form. Only in three exceptional circumstances where the benefits will be paid into your estate.
Section 37C of the Pension Funds Act limits the testamentary power of the members of pension fund schemes to dispose of his/her death benefits as he/she wishes.
The provisions of Section 37C also override the provisions of any law in the country which are contrary to its provisions. The High Court has previously held that the wording of section 37C leaves no room for an interpretation that half of the benefit accrues to the surviving spouse automatically by virtue of her marriage to the deceased being in community of property. The spouse in a marriage in community of property’s right to a one-half share in the pension fund of the other spouse is subject to the provisions of Section 37C. It is not an automatic accrual.
Section 37C is an important provision to take into consideration in estate planning.
Estate Planning 101
