Appointing a beneficiary LAW CORNER

2015-08-05 06:00

QUESTION: I have a number of investments where I have the option to appoint a beneficiary. Should I do so, and what will happen to those investments should I not appoint a beneficiary?

ANSWER: It is advisable to consult with your attorney and your insurance broker or planner to determine what will be best in your particular circumstances.

If you do not appoint a beneficiary, the proceeds of the investments will fall into your estate, unless the investment is an annuity.

If you appoint a beneficiary, the proceeds of the investments will fall outside your estate for administration purposes.

Your executor charges a fee of 3.5% (plus VAT if he of she is VAT registered) on the gross value of the estate, which may or may not include the investments. If you do not appoint a beneficiary, the proceeds of the investments will fall into your estate on which your executor will be entitled to charge a fee. If a beneficiary has been appointed, the investments will be paid to the beneficiary and will not form part of the gross value of your estate for administration purposes and your executor will not be entitled to charge a fee on the value of those investments.

Most investments, regardless of whether they fall within or outside your estate for administration purposes, will be added back in calculating the estate duty, if applicable, payable by your estate and where you have nominated beneficiaries on an insurance policy, the beneficiaries are liable for a pro rata payment of the estate duty in proportion to the proceeds they receive from the policy.

One reason for allowing investments to be paid into an estate and not nominating a beneficiary is to provide for liquidity in in the estate to pay the liabilities in the estate without assets in the estate having to be sold to provide such liquidity.

In each instance, it is advisable to liaise with your attorney and your insurance broker for advise on the best course to follow a they have personal knowledge of the value of your estate and what is the most cost effective way to deal with the investments

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