Oran Hall | Securing help for a child from the National Insurance Scheme
QUESTION: My children's father passed away three years ago. We lived together for 13 years, and during that time we had two children. After his death, I tried to get his NIS contribution for the children but was told at the NIS office that because he had married (11 months before his death) I could not get any benefits for the children. The children are now 16 and 5.
FINANCIAL ADVISER: Under the current NIS arrangements, there are no benefits that your children are eligible for. Two benefits that children normally get from the NIS - the orphan benefit and the special benefit - do not apply in this case.
The orphan benefit does not apply because your children have a parent who is alive. They do not qualify for the special child's benefit, which is paid up to the child's 18th birthday, because this applies when the mother - the primary care giver - has died and the father is out of the child's life completely. In such a case, the benefit would be on the basis of the mother's contributions.
In a case in which the deceased had a common-law spouse in a relationship of at least five years, or was married for at least three years, the spouse as next of kin would get a widower's or widow's pension, the duration of which would depend on the age of the surviving spouse and the age of the children.
Bear in mind that the NIS is a social security scheme and not life insurance, which facilitates the naming of beneficiaries. The NIS has specific rules about how and to whom benefits are distributed.
For general information, it should be borne in mind that NIS benefits are not automatic and benefits are payable only in cases in which the contributions requirements are met.
Although I am not saying that this applies to you, the Public Assistance Division of the Ministry of Labour and Social Security administers a number of non-contributory social assistance programmes. It provides financial assistance to the most vulnerable groups in the society, namely; children, persons with disabilities, the elderly, pregnant and lactating mothers and the unemployed.
It is important to make provisions for children and this is why estate planning is so important. Parents, to the extent they are able to afford it, should put life insurance in place for the benefit of their more vulnerable dependents.
Term insurance, though providing just coverage, does offer some amount of replacement of income in cases in which a bread winner dies prematurely. It is relatively cheap but the cost may increase over time in the case of renewable term insurance.
Parents should also make a will so that their assets can be distributed on time and to the persons they want their assets to go to. A will also helps to reduce the fall-out in families which follows the death of family members.
Although trusts tend to be costly to set up and maintain, they are also useful tools. They can be set up to facilitate the distribution of income to beneficiaries on a structured basis and allow for the protection of assets meant for beneficiaries, particularly vulnerable ones such as children.
Saving and investing are critical to the process of building an estate so effective money management strategies should be put in place as soon as an individual starts to work. Deferring satisfaction is a worthwhile price to pay to secure the future of loved ones as well as the future of the individual creating the estate.
In your case, even if your children's father had not married and had a relationship with you at the time of his death, any benefits would have come to you, not the children. In a sense, you could say such benefits would be indirectly for them.
- Oran A. Hall, principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel. Email firstname.lastname@example.org