Nomination of Beneficiaries (NOB) Framework

There is a big changes to the nomination framework from 1st September 09 onwards. There are a lot of info on it but I try to summarise a few points for you. If you need more info, you can just google on my subject title and I believe you will get a lot of info.

Nominations in the Past
* Before 1 Sep 2009, there is no provision in the Insurance Act for us to nominate our desired beneficiaries for our insurance proceeds.
* Nomination of beneficiaries was governed by Section 73 of the Conveyancing and Law of Property Act (CLPA) and Section 45 of the Co-operative Societies Act (CSA). Only NTUC Income is under the CSA.

Problems faced by policyowners in nominations
* When a policy owner names his spouse and/or children as beneficiaries of an insurance policy effected on his own life, Section 73 of CLPA will automatically create a statutory trust in favour of the beneficiaries, even though the policy owner may not have intended to create a trust.
* Once a trust is created, the policy owner will lose all rights and control over the insurance policy.
* Only NTUC Income under the Cooperative Societies Act(CSA) is able to freely nominate their desired beneficiaries.

What happened after 1st Sep 09?
2 Acts came in-force
1) Revocable Nomination under s 49M(2) of IA
2) Trust (Irrevocable) Nomination under s49L(2) of IA

Why the change?
* Our Government saw a need to consolidate the law on nominations by amending the IA to provide policy owners and insurers with clear directions on nominations.
* There are too many problem with the Section 73 and it is just too strange that only NTUC Income is able to make nominations

Explain the Revocable Nomination under s 49M(2) of IA

* It is a Revocable Nomination that allows a policy owner to unilaterally change his nomination at any time. Any legal entity can be nominated to be a beneficiary.

* However, the nomination is only applicable for distribution of the death proceeds. This means that while the policy owner is alive, he continues to retain all rights and control over the insurance policy, and any insurance payout while he is still alive will go to the policy owner.

Explain the Trust (Irrevocable) Nomination under s49L(2) of IA
* It is an Irrevocable Nomination which allows a policy owner to create a statutory trust in favour of the beneficiaries. Only the policy owner’s spouse and/or children can be nominated as the beneficiaries.
* This is similar to the trust regime created under section 73 of the CLPA. Once a policy owner creates a trust nomination, he will lose all rights and control over the insurance policy including the policy proceeds.
* However, the advantage is that the policy proceeds enjoy protection against claims from the policy owner’s creditors when this statutory trust is created unless there is an intention to defraud the creditors.

How about my Will after nomination?
* A Will can only supercede a Revocable Nomination.
* A valid will executed after a Revocable Nomination must be made known to the insurer and satisfy specific requirements under the Wills Act(Cap 352). There are a whole list of items that you must write in the Will about this particular policy under Regulation 5(3) of the Insurance (NOB) Regulations 2009

How about my previous nominations?
They will stay. No change.

Can I change my nominations after I made them?
Yes. but there are different criterias that you have to make between a Revocable and Irrvocable nomination before revocation.

Should I do my nomination for all my insurance policies now?
* Unless you have intention to give insurance proceeds of specific policies to specific person, then you do the nomination for that specific policy.
* I will not suggest that you do nominations for all your policies now to potentially conflict with your intentions under your Will.
* Write a Will to keep things neat and simple.