In EAPA-SA’s final EduWeb of 2021, Deon Theunis, Head of Distribution Support at Sanlam and Moremadi Mabule, Head of Wills Operations at Sanlam Trust, brought home the importance of educating South African employees to ensure they are financially literate. This information-packed webinar not only provided compelling evidence regarding the need for financial know-how, it also gave participants valuable information to use in their own journey to financial freedom. 

Deon Theunis started his presentation by saying, “We have all been tremendously exposed over the past 21 months. The pandemic plunged us into a new world and way of work that we could not have imagined prior to March 2020 – on an unimaginable scale. The big question is: “Who did this affect?” The answer is: Covid does not discriminate. It has affected everyone, and it is the poor who will ultimately bear the brunt of its burden. Armed with this knowledge, we cannot just sit back. Helping them to gain financial literacy can change the lives of our employees. Nelson Mandela famously said, “Education is the most powerful weapon we can use to change the world.”

A lesson in life insurance: Life Insurance 101

Here is a summary of Deon’s comprehensive presentation. 

Simply put, there are two kinds of insurance benefit: Death benefits and life benefits. These are two areas in which employers can make a huge difference in the lives of their employees through education and the help of a professional insurance specialist.

1. Death benefits

Purpose

To leave a legacy for one’s loved ones it is important to cover expensive estate duty, settle debt, cover short-term expenses and funeral costs. 

The insurance vehicles are:

  • Death benefit
  • Funeral benefit
  • Immediate expenses benefit

The recipients are

  • Beneficiaries
  • Estate
  • Any cessionary

2. Living benefits

Purpose:

To help with recovery and to return to a similar secure financial position as before any illness or injury and avoid financial ruin.

The insurance vehicles are:

  • Lump sum benefits
  • Income benefits
  • Disability, impairment, severe illness benefits

Recipients are:

  • The planholder

3. Key take-outs from Deon’s presentation

Deon made it clear, no matter an individual’s circumstances all is not lost. Starting where an employee currently stands they can be assisted to create a financial plan going forward:

  • Financial planning is key
  • Engage with a professional 
  • Sanlam has solutions to these problems 
  • It starts with financial literacy

For the last 18 months we have become more aware of the fact that death is not something far removed from us – it is close to home. Moremadi Mabule started her presentation by saying that there are many myths around the subject of Wills, and the only way we can change this narrative and help our employees is through education. Whether an individual drafts a will or not, their legacy must be distributed to someone. 

Shapiro is quoted as saying: “Everyone has a Will. You either draft one yourself or the state will draft one for you using the rules of intestate succession.” 

Why do we need a will?

A lot of people confuse the signing of a corporate beneficiary form with having a Will. Without a Will the deceased person has no say over who winds up the estate or their fees. There will likely be financial and legal challenges and disputes as the family are landed with the unfamiliar process of winding up a deceased estate.  Having a valid Will brings peace of mind that loved ones will be taken care of when an individual is no longer around, particularly when it  comes to distribution of the assets in an estate. 

Here are ten reasons why every person needs a Will:

  1. You decide how your assets will be distributed
  2. You decide who will take care of minor children, to nominate a guardian
  3. You can reduce taxes – depending on who inherits
  4. You can avoid a lengthy and more expensive legal process
  5. You decide who winds up your estate – your executor
  6. You can disinherit individuals who would otherwise inherit
  7. Life and circumstances change, for example
    • Divorce
    • Death of a beneficiary 
    • Death or birth of a child
    • Financial circumstances
  8. There will be no uncertainty about your last wishes
  9. You will be making an already difficult process less difficult for your family
  10. Wills are an essential part of estate planning and provide the opportunity for planning one’s estate.

Important things to remember to factor in when drawing up a Will: 

  • Funeral arrangements
  • Organ donation
  • Retirement or pension fund proceeds
  • Life cover with beneficiaries 
  • A Living Will declaration – where a incapacitated person elects not to be resuscitated 
  • Inter Vivos Trust assets
  • Business assets

Here are seven practical tips for estate planning including drawing up a Will:

All in all, it is important to get your estate planning right the first time or you may run out of changes to make it right. 

  1. Keep it simple
  2. Ensure there is enough cash in the estate to carry out your wishes and pay all debt
  3. Avoid clauses that cannot legally be carried out
  4. Ensure you know which assets do not form a part of your estate
  5. Understand the terms children/spouse/marriage
  6. Make provision for preferred claims (e.g. child maintenance and accrual claims)
  7. Make provision for a testamentary trust for minor children

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Most importantly, make the outcome practical and make it legal.

Don’t miss out on information that every employer and employee should know. If you did not participate in this valuable EduWeb webinar, we recommend you watch it on EAPASA’s Facebook page. Click here to be given practical insights into Financial literacy as the vaccine for employee wellness in a post-Covid world.