Sunday 27th February, 2005


Who inherits what

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Money Matters
with Raziah Ahmed

Recently, while completing an annuity application, I asked the couple: “Whom do you wish to name as your beneficiary?” Simultaneously, the husband named the son, and the wife named the daughter.

Five hundred years ago, the Law did not recognise the right of a female to inherit, and, except in the case of some Arab and Eastern cultures, attributed to women the same rights as that of children and imbeciles.

Today, if you die without a Will, the State decides how to divide your property, and such laws seek to protect women and children in particular. However the opportunities to grant bequests, or to leave legacies and gifts are pre-empted.

The persons who get inheritance according to State law, may not honour desires of the deceased to give a part of the estate to a Charity or to a poor relative. Such bequests are extremely important, and oft-times serve to revere the memory of the dead.

The document called a Will is a device for transferring estates from one owner to others, upon the death of the owner. If property is titled in such a way that another person on the deed will become the rightful owner of the property, the Will cannot alter that situation. This means that the Deed supersedes any delegations in a Will.

A named beneficiary designation also supersedes a Will. This means that in an insurance contract, for example, in which there is a named beneficiary, a delegation in a Will for the proceeds of the insurance will not be honoured, if the named beneficiary is alive.

Debts, obligations and liabilities, can affect the disbursement of property and funds, despite what appears to be titles of ownership, or beneficiary rights.

A person can be named in a Will to inherit cash in a bank account, or even a house in the village, for example, but can be legally prevented from acquiring any such cash, or property. Severe disappointments and family disputes can result from such misunderstanding.

There are several reasons why this may happen. The most obvious is that the property itself may have been assigned to a lending institution, as collateral against a loan. Such an assignment will prevent the heir named in the Will, or the named beneficiary on the Insurance from getting the property.

New needs

In other instances, the deceased may owe creditors, and the property may have to be sold off to satisfy those obligations. In cases where the amount owed is less than the amount of the proceeds, the balance will be paid over to named beneficiaries or heirs.

To illustrate: assume an Insurance policy is assigned as collateral for a mortgage loan, and the loan balance is $50,000, when the insured dies; assume the amount of insurance is $300,000 and an adult child is a named beneficiary on the policy. The assignment will override the named beneficiary up to the amount of indebtedness, that is, $50,000, and the balance will be paid to the adult child.

In practice, the entire sum of $300,000 will be paid over to the lending institution. That institution will then honour the claim of the named beneficiary, after it satisfies its own claim.

The assumptions, which we make about ownership and the way the use of property changes over time horizons, require documentation, to aid memory and re-planning to meet new needs.

As a group, females are living longer than males, and new avenues must be found to maintain living standards or else: the more things change the more they remain the same!

Next week we will examine some novel ways to transfer property for an aging widowed population.

n Raziah Ahmed is a registered financial consultant

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