Most South Africans believe their will controls what happens to everything they own when they die.
For life insurance policies and retirement fund savings, this is often not true at all. These assets are frequently governed by a separate, far less visible document: the beneficiary nomination form completed when the policy or fund membership began, sometimes decades earlier and never looked at again.
Beneficiary nominations on life insurance and retirement policies can override your will entirely, and outdated nominations remain one of the most common and costly estate planning mistakes in South Africa.
This blog explains the legal distinction between assets controlled by your will and assets controlled by a nomination form, why retirement funds work differently from life insurance, and what you need to check to make sure your actual wishes are the ones that are followed.
Why Policy Proceeds Can Bypass Your Will Entirely
A will governs the distribution of your deceased estate, meaning the assets that belong to you personally at the date of your death. Life insurance and retirement fund benefits, however, are often structured as contracts between you and a third party (an insurer or a retirement fund), with their own rules about who gets paid out and how.
Where a valid beneficiary nomination exists, these proceeds are generally paid directly to the nominated person, outside the estate, rather than being distributed according to the will. This means a will can state one set of intentions in black and white, while an outdated nomination form, forgotten in a filing cabinet or an online member portal, quietly directs a significant sum of money somewhere else entirely.
Life Insurance Nominations: How They Work in South Africa
With a standalone life insurance policy, the policyholder completes a beneficiary nomination naming one or more people to receive the proceeds on death.
Where this nomination is valid and up to date, the insurer pays the nominated beneficiary directly, generally without the proceeds forming part of the deceased estate for distribution purposes. This can be a significant advantage, since it often means the proceeds are not delayed by the estate administration process and, depending on the circumstances, may fall outside the reach of the deceased’s creditors.
It also means the policyholder’s will has no say in where these proceeds go, regardless of what the will itself states. If a will says “my life insurance proceeds should be shared equally between my children,” but the policy’s nomination form still names an ex-spouse from a marriage that ended a decade earlier, the ex-spouse is generally still entitled to receive the payout as nominated, and the instruction in the will carries no legal weight over the policy.
It is also worth noting that, depending on how a policy is structured and who paid the premiums, the proceeds may still be included in the deceased’s dutiable estate for estate duty calculation purposes under the Estate Duty Act 45 of 1955, even though they are paid directly to the nominee rather than through the executor.
This is a technical area that should be reviewed with an estate planning professional, since the duty implications differ depending on the specific policy structure.
Retirement Fund Death Benefits Are Different: Section 37C
Retirement fund savings, including pension funds, provident funds, and retirement annuities, are treated quite differently from standalone life insurance policies. Section 37C of the Pension Funds Act 24 of 1956 governs how death benefits in these funds are distributed, and it was specifically designed to protect financial dependents, not simply to honour whatever is written on a nomination form.
Under Section 37C, the trustees of the retirement fund have a legal duty to investigate who the deceased member’s actual dependents were at the date of death, including a spouse, children, and anyone else who was factually dependent on the member for financial support. The trustees must then exercise their own discretion to decide how the benefit should be distributed among dependants and nominees, taking the nomination form into account as one factor, but not treating it as binding.
This means a retirement fund nomination, unlike a life insurance nomination, does not automatically guarantee that the named person receives the full benefit. Trustees can, and sometimes do, allocate a portion of a retirement death benefit to a dependant who was never named on the nomination form at all, if their investigation shows that person was genuinely financially dependent on the deceased. This nuance frequently surprises both testators and beneficiaries, and it is an important distinction to understand when thinking about how these two types of policies interact with your will.
Why Outdated Nominations Are a Common and Costly Mistake
Beneficiary nomination forms are typically completed once, at the start of a policy or fund membership, and then forgotten.
Life, however, rarely stays the same. Divorce, remarriage, the birth of children, the death of a previously nominated beneficiary, and simply growing apart from someone named many years earlier are all common events that can leave a nomination form badly out of step with a person’s actual current wishes.
Executor Law regularly sees cases where a policyholder’s will reflects their current family circumstances in detail, while their life insurance or retirement fund nomination still names a former spouse, an estranged relative, or someone who predeceased the policyholder entirely. In the case of life insurance, this can mean a significant payout going to someone the deceased would never have chosen.
In the case of a retirement fund, outdated nominations can still influence the trustees’ decision, delay the payment while an investigation is carried out, and create friction between competing dependants and nominees.
What Happens If No Valid Nomination Exists
If a life insurance policy has no nominated beneficiary, or the nomination is invalid or has lapsed, the proceeds are typically paid into the deceased estate and distributed according to the will, or the Intestate Succession Act if there is no will. While this brings the policy back under the will’s control, it also means the proceeds become subject to estate administration delays, executor’s fees, and, potentially, the claims of estate creditors before beneficiaries receive anything.
For retirement funds, the absence of a nomination does not stop the Section 37C process. The trustees are still required to investigate and identify dependents and make a distribution, regardless of whether a nomination exists. This process can, however, take considerably longer without any indication of the member’s wishes to guide the trustees’ enquiry.
How to Keep Your Nominations Aligned With Your Will
The safest approach is to treat beneficiary nominations as a living part of your estate plan, reviewed at the same time and with the same regularity as your will itself. Every time you update your will, whether after a marriage, a divorce, the birth of a child, or any other significant life event, it is worth contacting your insurer and retirement fund administrator to confirm who is currently nominated on each policy and update it where necessary.
It is also worth understanding that your will and your nominations serve different legal purposes and are not automatically kept in sync by updating one and not the other. A comprehensive estate plan treats them as two separate instructions that need to point in the same direction, rather than assuming one will simply follow the other.
Make Sure Every Document Reflects Your Real Wishes
A carefully drafted will means little if your life insurance and retirement fund nominations are pointing in a different direction. Treating these as separate but connected parts of a single estate plan, reviewed together and kept current, is the only reliable way to ensure your actual wishes are carried out. Every policy and fund has its own rules and terms, so this article should be read as general guidance rather than a substitute for advice tailored to your specific policies.
Executor Law assists South African clients in reviewing how their wills, life insurance nominations, and retirement fund nominations work together, so that no asset ends up governed by an instruction nobody remembers giving.
Speak to an estate planning specialist about aligning your nominations with your will →
Frequently Asked Questions
Does my will control who receives my life insurance payout in South Africa?
Generally not. Where a valid beneficiary nomination exists on the policy, the insurer pays the nominated person directly, regardless of what your will states. Your will only applies if no valid nomination is in place.
Are retirement fund death benefits paid strictly according to the nomination form?
Generally no. Once the bank is notified of the death, it will typically freeze the account until the estate process resolves how the funds should be split, regardless of who was operating the account beforehand or what the mandate for signing previously allowed.
What if the joint account was only opened so an elderly parent’s adult child could help manage their banking?
This is a common scenario, and it matters for determining the actual split of the funds. If the evidence shows the child never contributed their own money and was added purely for convenience, the funds are generally treated as wholly belonging to the parent, meaning the full balance forms part of the parent’s estate rather than being split equally.
How long does it typically take before a joint account is unfrozen after death?
There is no fixed timeframe, and it depends on how quickly Letters of Executorship are obtained and how straightforward the bank’s internal process is. Families should expect this to take at least several weeks in a straightforward case, and longer where documentation is incomplete or the split is disputed.