Sunday 4th May, 2008


Where there is a will

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The saying “the rule of law is better than the rule of an individual” is attributed to Aristotle, some five or six centuries before the writing of the Gospel.

Its purpose is to regulate the individual and maintain order in society, according to man’s understanding.

While any type of disorder is worrisome, an unhappy worry can occur when someone dies, if the future of the estate left by the deceased is unclear.

If you die without a will, you are said to have died intestate, and the law of the state determines who gets what.

If you die with a will, your will goes to probate, and the court of law will prove the will to be valid and distribute the assets of the estate according to the written and witnessed intentions of the testator.

In response to one of my respected readers who sent me two e-mail on this matter, I’ll elaborate on some aspects of the beneficiary designation versus the naming in a will.

If an insurance policy or a pension plan names the beneficiary as “estate,” the money in those accounts will go into the assets of the estate and will become subject to probate if there is a will or letters of administration, if there is no will.

In terms of a time to the money, this legal process can take about two years on average, and the money is unlikely to be available to anyone during that time.

Pure pensions

If the original designation of “estate” is changed during the lifetime of the insured or annuitant (pensioner), and this is duly recorded by the insurer or pension provider, the law recognises the named individual/s, and the money does not pass into the estate, but is paid directly to the named.

But there is a difference between an insurance contract and an annuity contract, which leads to a complication when owners try to change names.

This is because some beneficiaries are protected in law. They are called irrevocable beneficiaries and cannot be removed without their legal consent.

This applies to life insurance contracts only.

Because life insurance contracts are for the benefit of the heirs, certain heirs are protected in law. They are: wife, husband and children of a marriage, or arguably, within established common-law relationships.

Such heirs can be removed if they are of legal age, and they sign a document to that end.

Pure pensions and annuities are for the benefit of the pensioner and not for the benefit of his heirs. It is common to be able to remove the names of spouses and children from pension and annuity contracts without the consent of the spouse or children.

In this instance, they are revocable.

But this is often misunderstood, and some institutions still ask for their signatures in order to effect the change.

In truth, their names as beneficiaries give them no claim to the money unless the pensioner dies, or unless there is some insurance tied into the contract.

Heirs whose relationship is that of mother, sister, brother, friend, cousin, etc, can be removed from insurance contracts without their written consent, since they are deemed to be revocable.

The law that protects the spouse and children does not protect this class of beneficiaries.

Lady Justice is blindfolded, and armed with scales and a sword, signalling the impartial balancing of interests before the law.