Most people assume their will is the final word on what happens to their assets. It isn't — and the gap between what your will says and what your nominations say could cost your family dearly.
You signed your will. You had it witnessed. You filed it somewhere safe. As far as most people are concerned, that's the end of the estate planning conversation.
It isn't.
Here is something that surprises almost every client I raise it with: the majority of your most significant financial assets — your retirement annuity, your pension or provident fund, your life assurance policy — are not governed by your will at all. They are governed by your beneficiary nominations. And if those nominations contradict your will, or haven't been updated in years, the consequences for your family can be severe.
When you open a retirement annuity, take out a life policy, or join an employer's pension fund, you are asked to nominate a beneficiary — the person or people who should receive the proceeds when you die.
Here is the critical point: these nominations operate entirely outside your will.
A life policy paid directly to a nominated beneficiary bypasses your estate completely. It doesn't go through your executor. It isn't subject to executor's fees. It isn't delayed by the winding-up process. It simply pays out to the person named.
That sounds like a good thing — and it can be. But it becomes a serious problem when:
Retirement annuities, pension funds, and provident funds are governed by the Pension Funds Act — which adds another layer of complexity. The trustees of the fund are legally required to distribute the proceeds at their discretion, based on financial dependency — not simply according to your nomination.
Your nomination is a strong signal to the trustees, and they will generally follow it. But it is not legally binding in the way a will is. This means that if your nomination is outdated, unclear, or omits a financially dependent person — such as a child born after you completed the original form — the trustees may distribute the proceeds differently to what you intended.
The solution is not to stop nominating. It is to nominate carefully, review regularly, and make sure your nomination reflects your current family and financial reality.
1. Nominations that haven't been updated after a life event
Marriage, divorce, the birth of a child, the death of a nominated beneficiary — each of these should trigger a review of every nomination you hold. Most people update their will when life changes. Almost nobody updates their nominations at the same time.
2. Naming your estate as beneficiary on a life policy
When a life policy is paid into your estate rather than directly to a named beneficiary, it becomes subject to executor's fees of up to 3.5% — on what is often the largest single asset in your estate. On a R5 million policy, that is R175 000 that could have gone to your family.
3. Mismatched nominations and will provisions
Your will might carefully divide your estate between your children in specific proportions. But if your life policy pays directly to one named child, and your RA pays to another — the intended balance is completely undone, often with no way to correct it after the fact.
4. No nomination at all
Leaving a nomination blank means the fund trustees or insurer must make the decision without any guidance from you. The outcome may bear no resemblance to your wishes.
Want to work through this for your specific situation? Let's have a conversation.
Or visit the Book a Discovery Call page for more options.
Shaun Dalton CFP® | Postgraduate Diploma in Investment Planning | LLB
Efficient Wealth — Authorised FSP 655 | Potchefstroom