If you’ve only got a minute:
- Insurance nominations ensure swift, direct transfer of your life insurance payouts to loved ones, avoiding delays and legal complexities.
- Choose between revocable nominations and irrevocable trust nominations.
You have meticulously planned for your family's future, securing their financial well-being with life insurance. But have you considered how quickly and efficiently they can access those funds when they need them most?
What happens without a nomination?
Without an insurance nomination, your well-intentioned policy could become a source of delay and frustration.
Even with a clear and valid will, the payout process could take some time.
Without a will, Singapore's intestacy laws dictate the distribution, involving lengthier court procedures and delays.
This waiting period can create significant hardship, particularly for families who depend on the insurance proceeds for their daily expenses.
Beyond the financial strain, the absence of a nomination can also spark disagreements among family members about the distribution, adding emotional distress to an already challenging time.
Read more: Plan your legacy, write a will
Who can be a nominee?
Nominees can be individuals, like family members and friends, or even entities, such as charities or trusts. This flexibility allows you to tailor your nominations to your specific circumstances and wishes.
There are a few key points to keep in mind. If you wish to nominate a minor (someone under 18), the insurance proceeds will be held in trust for them until they reach legal age. A trustee, whom you should also appoint, will manage these funds on their behalf. This ensures the child's financial well-being is protected while they are still young.
While the terms of a nominee and a beneficiary are often used interchangeably, they have distinct legal meanings. A nominee is simply the person designated to receive the insurance payout. The beneficiary, on the other hand, is the owner of the funds. In most cases, the nominee and beneficiary are the same person.
However, when a minor is nominated, a trustee acts as the nominee, receiving and managing the funds, while the child remains the beneficiary. Understanding this distinction clarifies the roles and responsibilities involved.
Types of nomination
When it comes to insurance nominations, you have choices that cater to different needs and levels of control.
Let's break down the 2 main types: Revocable and Trust (Irrevocable) nominations.
Revocable nomination
This is the most common and flexible type. Think of it like a draft you can edit anytime. With a revocable nomination, you retain full control over your insurance policy and can change your nominees whenever you wish, without needing their consent. Life changes, and so can your beneficiaries. This option allows you to adapt your nomination to reflect those changes, such as marriage, divorce, or the birth of a child, with ease.
Trust (irrevocable) nomination,
This option provides greater protection for your beneficiaries, but with less flexibility for you. Once set up, it's generally irreversible without the consent of all nominated beneficiaries. A trustee manages the funds according to your instructions, providing an added layer of security and control for your beneficiaries' financial well-being. This added layer of permanence safeguards the policy's benefits, shielding them from potential creditors.
While it offers stronger protection, it requires more careful planning upfront due to its permanence. Therefore, consider this if asset protection and ensuring your family's financial security are paramount concerns.
In Singapore, a valid will generally overrides a revocable nomination but not an irrevocable trust nomination. Thus, it's essential to understand the implications of each nomination type and how it interacts with your will to ensure your wishes are carried out as intended.
How to make an insurance nomination?
Whether you choose a revocable nomination or a trust (irrevocable) nomination, you must follow specific legal procedures.
Basic requirements for both types
To make any type of insurance nomination:
- You must be the policyowner, and the policy must insure your own life.
- You must be at least 18 years old.
- You must use the official nomination form provided by your insurer.
Additional steps for a trust (irrevocable) nomination
Since a trust nomination permanently transfers ownership of the policy benefits to your beneficiaries, stricter rules apply.
- The nomination form must be signed in the presence of 2 witnesses.
- Both witnesses must be at least 21 years old, and they cannot be your beneficiaries or spouses of your beneficiaries.
- You must clearly specify the percentage of proceeds each beneficiary will receive.
What kind of nomination should I make?
Different types of insurance policies allow for different types of nominations. Understanding where Revocable and Trust (Irrevocable) nominations apply will help you make the right choice for your specific policy.
Source: Life Insurance Association
Seeking professional advice
Seeking professional advice is crucial. Contact your Wealth Planning Manager for the correct forms, which may include those listed below, to nominate or change your beneficiaries:
- Form 1: Trust Nomination
- Form 2: Revocation of Trust Nomination
- Form 3: Appointment/Revocation of Trustee of Policy Moneys
- Form 4: Revocable Nomination
- Form 5: Revocation of Revocable Nomination
- Form 6: Notice of Revocation of Revocable Nomination
Protecting your family's financial well-being starts with a simple step: setting up your insurance nominations. Give yourself peace of mind and your family the security they deserve.
