How to… avoid death benefit disputes
1. Establish a plan for death benefit cases
Implement a procedure for investigating death benefit cases on notification of death and for gathering all necessary information (eg identify potential beneficiaries, establish their relationship to the member and examine their financial circumstances). All relevant factors must be considered. Don't forget your data protection obligations at each stage.
2. Check the scheme rules
Carefully review the applicable rules, rather than simply a summary in a booklet. Which individuals will qualify as beneficiaries under the rules, and on what grounds (eg financial dependency on the deceased member)? Check that any proposed beneficiary falls into a qualifying category.
3. Check the expression of wishes form
In most schemes, a nomination form is relevant but not binding. Check for other potential beneficiaries, and for any facts that might reduce the weight you give to the member’s stated choice (such as a subsequent change in family circumstances).
4. Ask personal questions if necessary
This is a difficult time for family and friends and your questions should always be worded sensitively. However, if further information is needed in order to establish material facts, you must try your best to get it, even if you feel you risk being intrusive.
5. Keep good records of all discussions
It is vital that you record the factors that you took into account in making your decision, and keep detailed minutes of any meeting, so you can deal with any challenges to your decision.
6. Consider departing from guidelines
Guidelines or policies for dealing with death benefits can be helpful, but always consider whether the circumstances of a particular case require you to depart from these.
7. Keep interested parties informed
Keep anyone with a legitimate interest in the outcome informed of progress. Before reaching a decision, avoid giving potential beneficiaries the impression that money will be paid to them. Relevant individuals should be informed of the decision, with reasons.
8. Be careful when paying to a trust
If you are paying the lump sum into a trust on behalf of a beneficiary, such as a child or someone who is mentally incapacitated, check that the trust will be able to make the intended payments. The trust should also be bound by any conditions that you have decided should apply.
9. Reach a decision on full information
Your initial consideration of the case might give rise to more questions. If you fail to make full enquiries, or to investigate discrepancies in the information provided, your decision may not withstand scrutiny. If you have further questions, then postpone your decision and try to find answers to these. You might need to delegate the final decision to a committee if you are not going to have another trustee meeting for a while.
10. Ensure delegations are made correctly
You may wish to delegate the power to make decisions on some cases (eg where there is only one potential beneficiary) to limit the number of cases that need to be considered at full trustee meetings. Check that the rules give you power to delegate and formally minute the delegation, the type of decisions which may be taken by the delegate and the circumstances in which a decision must revert to the full trustee board.