Sihle Msayi, Consultant on the Sygnia Umbrella Retirement Fund

Legislative change effective 1 December 2021

In terms of amendments to the Insurance Act 18 of 2017, effective 1 December 2021, death and funeral benefits under unapproved group policies  must adhere to the insured member’s Beneficiary Nomination Form.

If no valid form is on record, proceeds are paid into the deceased member’s estate, not directly to family members.

The issue: Many members do not nominate a beneficiary

In numerous cases, members pass away without having completed a valid Beneficiary Nomination Form. Benefits are consequently routed through the estate, causing delays, additional administrative burdens, financial hardship and emotional distress for their grieving families.

When benefits are paid into the estate instead of directly to beneficiaries, the process becomes longer and more complex. Estate administration (winding-up) can take six months to several years, depending on its complexity.

Members are strongly encouraged to complete and regularly update their beneficiary nomination form – particularly after major life events (marriage, divorce, birth, death of a beneficiary).

What families should do after the member’s death

1. Determine the death benefit amount

Determining the death benefit amount is crucial, because:

• It allows the executor to include the correct value in the estate inventory for compliance and accurate tax calculations.
• The total estate value (including the death benefit) determines whether the Master of the High Court issues a letter of authority or of executorship (see 5 below).
• Families can plan for funeral costs and immediate financial needs while waiting for the estate to be wound up.

2. Appoint an executor

The executor is responsible for collecting all necessary documents, preparing a full inventory of assets and liabilities and engaging legal assistance on tax clearance and estate compliance.

3. Issue a creditors’ notice

A notice must be published (in the Government Gazette or a local newspaper) for at least 30 days, allowing creditors to lodge claims.

4. Submit documents to the Master of the High Court

The compiled inventory and statutory forms must be submitted to the Master.

5. Receive letter of authority or of executorship

The office of the Master of the High Court will issue either a letter of authority (for estates under R250 000) or a letter of executorship (for estates over R250 000).

Note: This threshold applies to the total estate value, not just the death benefit.

Estates under R250 000

If the estate value is less than R250 000, the Master of the High Court will issue a letter of authority instead of a letter of executorship, meaning the estate can be wound up under a simplified process that is generally quicker and less costly. The executor appointed under a letter of authority has limited powers compared to an executor under a letter of executorship, but it still allows them to manage the estate, open an estate bank account and distribute funds according to the law.

Estates over R250 000

For estates over R250 000, the Master of the High Court issues a letter of executorship instead of a letter of authority. This triggers a full estate administration process, which is more detailed and regulated.

The executor must follow stricter compliance requirements under the Administration of Estates Act, and a formal liquidation and distribution account must be prepared and submitted to the Master. The account is advertised for inspection, and creditors have an opportunity to lodge claims.

The process generally takes longer and may require professional assistance from attorneys or estate practitioners.

6. Open an estate account

To open an estate account, the appointed executor must go to a bank with the following documents:

• Letter of authority or letter of executorship issued by the Master of the High Court
• Certified copy of the death certificate
• Original ID of the deceased
• Executor’s original ID and proof of address.

The bank will then create an Estate Late account, a special account used only for managing the deceased’s assets and paying creditors or beneficiaries. This account ensures that all transactions are properly recorded for submission to the Master’s office later.

After payout, the executor must ensure all documents – including bank statements –are filed with the Master of the High Court to complete the estate process and distribute funds in line with legal obligations.

In conclusion

Completing and updating your Beneficiary Nomination Form is one of the simplest yet most effective steps you can take to protect your loved ones from unnecessary delays and financial stress. By ensuring your wishes are documented, will help the family avoid lengthy estate processes and provide them with timely access to funds during a difficult time. Follow these steps to ensure the benefit is paid out in line with the deceased member’s wishes:

• Ensure your Unapproved Death & Funeral Beneficiary Nomination Forms are accurate and current.
• Update the forms after major life events such as the birth or adoption of a child, the death of a beneficiary or a marriage.
• Store copies securely with your employer, fund administrator or insurer.

ENDS