Altogether, there are two types of insurance nomination – Revocable Nomination; and Trust Nomination. In brief, their purpose is to allow you to distribute the insurance policy’s benefit to your intended beneficiary. However, there are some differences that you must know. With this in mind, let’s understand eight things to know for a trust nomination in Singapore.

Table of Contents:

1. Who can make a Trust Nomination?
2. What types of policy are relevant?
3. Will I lose my rights to the policy?
4. How will the Policy benefits be distributed?
5. What if the nominee dies before me?
6. How do I submit a Trust Nomination?
7. Can I make changes to the nomination?
8. When should I make a Trust Nomination?

One Minute Summary:

• In order to make a trust nomination, you need to be the policy owner under the policy.
• After you have made a trust nomination, you will lose all rights to the ownership of the policy.
• Summing up, your nominee(s) will receive all the insurance policy’s benefits.
• It is important to realise that you need obtain consent from certain parties in order to revoke a trust nomination.

Part 1: Who can make a Trust Nomination?

Firstly, you need to be the policy owner under the policy. Moreover, you need to be at least 18 years old.

Part 2: What types of policy are relevant?

Secondly, the insurance policy must

• Be a life policy, or an accident and health policy; and
• Insure the life of the policy owner; and
• Provides death benefits; and
• Not be the subject of any trust created under Section 73 of the Conveyancing and Law of Property Act (Cap. 61); and
• Not be an annuity purchased with the retirement sum under Section 15(6C) of the Central Provident Fund Act.

Part 3: Will I lose my rights to the policy?

In a word, yes. As the policy owner, you will lose all rights to the ownership of the policy. While this may be true, you remain responsible to pay and service the insurance policy.

Part 4: How will the Policy benefits be distributed?

On the whole, the nominee will receive all the insurance policy’s benefits.

What if the nominee is below 18 years old?

In this situation, the parent or the legal guardian will receive the insurance policy’s benefits. In either case, the parent or the legal guardian must not be the policy owner.

Moreover, the trustee (other than yourself) can also receive the policy benefits.

Part 5: What if the nominee dies before me?

When the nominee dies before the policy owner, the deceased nominee’s share will go to the nominee’s estate.

Case 5.1: Deceased Nominee has made a valid Will

In this case, we will distribute the proceeds according to the instructions in the Will.

Case 5.2: Deceased Nominee does not have a valid Will

On this occasion, the Intestate Succession Act will dictate the distribution of the proceeds.

Note: This distribution of policy benefits is different from a Revocable Nomination.

Part 6: How do I submit a Trust Nomination?

For this purpose, we will use the insurance company’s prescribed Form 1, Trust Nomination Form. It is important to realise that you will need to submit one form for each relevant policy. In other words, if you have three insurance policies, then you will need to complete three forms.

Part 6.1: Who can I nominate?

Basically, you may nominate your spouse and/or children only. In sum, the total share of the policy proceeds must add up to 100%.

Part 6.2: Criteria for Witness

Generally, there are two criteria in order to be a witness for a Trust Nomination.

1. Firstly, the witness must be at least 21 years old.
2. Secondly, the witness must not be a nominee or the spouse of a nominee.

Trivia: Personally, I prefer not to have the witnesses’ section on the same page as the nominees’ section.

Part 6.3: Trustee

In addition to the nominees and witnesses, you need to appoint at least one trustee. In order to be a trustee, the person needs to be at least 18 years old. If you need to appoint more than two trustees, then you may use Form 3, Appointment of Trustee.

Can the witness be the trustee?

Yes, the witness may be the trustee.

Can the nominee be the trustee?

Yes, the nominee may be the trustee.

Can the policy owner be the trustee?

Yes, the policy owner may be the trustee. However, he will not be able to do the following:

1. Firstly, as the trustee and the policy owner, he cannot consent to the revocation of the trust Nomination.
2. Secondly, he cannot consent to the variation of a term or conditions of the relevant policy.
3. Finally, he cannot give a valid discharge to the insurer that issued the relevant policy for any payment made.

Part 7: Can I make changes to the nomination?

Generally, yes. In order to revoke a Trust Nomination, we will use Form 2, Revocation of Trust Nomination.

Case 7.1: Trustee is not the policy owner

In this case, the policy owner may obtain written consent from the trustee in order to revoke the nomination.

Case 7.2: Trustee may be the policy owner

In this situation, the policy owner may obtain written consent from

• each nominee (who is at least 18 years old); and
• the parent or the legal guardian (when the nominee is below 18 years old).

By the same token, the parent or the legal guardian cannot be the policy owner.

Case 7.3: A nominee dies before the policy owner

Similar to Case 7.1, we may obtain written consent from the trustee in order to revoke the nomination. In the same way, the trustee must not be the policy owner.

Part 8: When should I make a Trust Nomination?

Undoubtedly, a trust nomination can prove its worth. For instance, the benefits are protected from your creditors in the event of bankruptcy. However, the inflexibility in making a change may be a point of concern. Besides, there may be an unintended consequence when a nominee passes away before the policy owner.

To conclude, speak to a qualified estate planner before you make an insurance nomination. Through a detailed discussion, we fulfil your wishes and protects your interest simultaneously.

Checklist:

1. Consolidate all your insurance policies into a proper insurance policy summary.
2. Get a file to store all your insurance policy related documents.
3. Speak to an estate planner to evaluate whether a trust nomination is suitable for you.
   

This post is part of Starter’s Guide! This means that I have taken extra time and effort to explain the basics of the presented topic in a simple manner. In effect, I hope this helps you to start responsible planning today. Subscribe to my newsletter if you like to see more of these content!

Reference:
Insurance Act (Chapter 142)