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Estates and Wills
Wednesday, February 3, 2016 - 12:39
An affidavit is not always enough

A retirement fund has been rapped for paying out a death benefit relying only on affidavits without seeking proof of levels of dependency of the deceased.

The Pension Funds Adjudicator Muvhango Lukhaimane has ordered Bidvest South Africa Retirement Fund (first respondent) to re-investigate the payment of the death benefit to the deceased’s two brothers. The deceased’s girlfriend (complainant) said that the deceased who was employedby Voltex (Pty) Ltd and his mother had both died in a motor accident on 7th April 2013. The deceased’s mother and five-year old daughter were his only nominated beneficiaries. The complainant is the child’s mother.

She said on the 1st August 2014, the board resolved to allocate the death benefit in the amount of R317 736.76 as follows:  two brothers of the deceased R47 660.51 (15%) each; the complainant 0%; and the minor daughter R222 415.73 (70 %).

The complainant asserted that because the deceased’s mother had passed away, his daughter should be his only beneficiary. She said she informed the board of management of the first respondent and the human resources department of the employer that the deceased’s daughter was his only dependant and not his brothers. However, the board decided to allocate part of the death benefit to the deceased’s brothers.  

She had informed the first respondent that the deceased’s one brother was a self-employed businessman who was involved in the television entertainment business and the other brother was an attorney. However, the first respondent failed to investigate the information provided. She submitted that the deceased’s daughter was prejudiced by the first respondent’s failure to conduct proper investigations. The complaint was also unhappy that she did not have a choice of the trust account for the placement of the minor child’s portion of the death benefit. The first respondent further submitted that the board determined who will receive a benefit and in what portions, using the principles of reasonableness, fairness and equity. The board may identifythe following persons to receive benefits:

  • Legal dependants – those dependants such as a spouse and children whom the deceased had a legal duty to support.
  • Factual dependants – those whom the deceased supported financially but did not have a legal duty to support.
  • Nominees – those persons whom the deceased nominated on his beneficiary nomination form to receive a benefit. The beneficiary nomination form is used as a guide only and is not binding on the first respondent.  

It added that the board may not favour legal dependants over factual dependants based on biological relations.  Based on the information provided, the board identified the deceased’s brothers as factual dependants at the time of his death. The first respondent said the deceased’s brothers confirmed in sworn affidavits that they were partially financially dependent on the deceased at the time of his death. However, they failed to furnish proof of the level of their dependency on the deceased. 

While the board did not have any source other than the affidavits to rely on, there were no contrary findings or information to suggest that the brothers were not dependent on the deceased. No objections were raised by the complainant or any interested party until January 2015. The first respondent further submitted that the complainant did not inform the first respondent of the deceased’s brothers’alleged employment prior to the board allocating and paying the benefit. The complainant first raised the objection to the distribution in January 2015, long after the investigations werecompleted and payment made.

The board conducted investigations and paid the allocated benefits on the 6th August 2014.  When the board made its decision, it was satisfied that the deceased’s brothers were unemployed and were partially dependent on the deceased based on the information provided to the board of management. On the question of the complainant’s unhappiness of where the minor child’s benefit had been paid, the first respondent said the board was granted discretion when distributing benefits.

The first respondent had required the complainant to indicate whether she would prefer for the benefit to be placed in a beneficiary fund and to receive a monthly income in respect of the minor child.  She indicated “yes” on the affidavit.  She also indicated that she did not have any knowledge of investments.

Taking into account the complainant’s election and the fact that she did not have investment knowledge, the child’s benefit was placed in the Alexander Forbes Beneficiary Fund. In her determination, Ms Lukhaimane said Section 37C of the Act governs the disposition of death benefits. It placed a duty on the board of management to identify the beneficiaries of a deceased member and also vested the board with discretionary powers on the proportions and manner of distributing the proceeds of a death benefit.

As with the exercise of any discretionary power, in effecting an equitable distribution the board is required to give proper consideration to relevant factors and exclude irrelevant ones from consideration. The board of management may not unduly fetter its discretion by following a rigid policy that takes no account of the personal circumstances of each beneficiary and of the prevailing situation.  She said the complainant submitted that she informed the board of management of the first respondent and the human resources department of the employer that the deceased’s daughter was his only dependant and not his brothers. However, the board decided to allocate part of the death benefit to the deceased’s brothers.

She said the complainant had submitted that she informed the first respondent about the brothers’ employment status. However, the first respondent failed to investigate the information provided. The board of first respondent relied on the affidavits submitted by the deceased’s brothers who had failed to furnish proof of their dependency on the deceased.

“This Tribunal is of the view that the board did not have any source other than the affidavits to rely on.

“However, it proceeded with the allocation of the death benefit based on the affidavits received and in the absence of any proof of their levels of dependency on the deceased. The first respondent’s conduct is quite derelict to the prejudice of the minor child.

“The complainant submitted that she raised the issue of the deceased’s brothers with the first respondent. However, the mere reliance on the affidavits means that the board of the first respondent only established dependency and not the level thereof, which is crucial when dealing with multiple beneficiaries in order to ensure equity, otherwise the decision is arbitrary as it is not based on factual information. 

“Therefore, it is clear that the first respondent did not conduct a proper investigation in terms of section 37C of the Act.” Ms Lukhaimane also said it was a common law right for a guardian to administer the financial affairs of the minor child. She said the complainant should be allowed to select the beneficiary fund especially in this instance where a beneficiary fund chosen is linked to the administrator.

“The business interest of the second respondent cannot be said to be independent of the decision made. The board of management of the first respondent has decided on the mode of payment of the death benefit. However, it cannot force its preferred service provider on the complainant.

“Over time, the Registrar of Pension Funds has to look into these arrangements where fund administrators conduct other ancillary businesses that by default provide other services to the funds they administer. Therefore, the complainant should have the right to decide on which beneficiary fund the funds due to the minor child should be invested.”

Ms Lukhaimane ordered the decision of the board of the first respondent  be set aside and for the first respondent to re-investigate the allocation of the death benefit in respect of the deceased’s brothers. The board of the first respondent was also ordered to re-allocate the death benefit in terms of section 37C of the Act taking into consideration the factors raised in this determination.

Copyright © Insurance Times and Investments® Vol:29.2 1st February, 2016
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