Can Your Insurance Payouts Be Distributed Via A Will?

Christopher Tan

Are you aware that a will may not supersede the nomination you made in a life insurance policy?

Typically, when a person passes away with a will, the person’s estate will be distributed to the beneficiaries according to the will, by the named executor(s) of the will.

However, when you have a named nominee under your life insurance policy, depending on the type of nomination done, the insurance proceeds may or may not distributed according to your will, since there is a named nominee who is entitled to receive the proceeds.

If you are interested to find out whether your insurance payouts can be distributed via a will, watch this video as Christopher Tan, CEO of Providend, explains more in detail.

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Hello, everyone. Welcome to our video series on wealth management. Today, we’re going to discuss the issue with regard to estate planning. And specifically, on assets that cannot be distributed via a will. In our last video, we talked about two of such kind of assets. Firstly, assets that are under joint accounts or properties that are under joint tenancies. The second kind of asset would be your monies in your CPF accounts. And we didn’t have time to talk about the third kind of asset that cannot be distributed via a will. And that is certain insurance policies with certain nominations.

You see before 1st September of 2009, beneficiaries have no right to the proceeds of your policies in the event of your death. What do I mean? Now, many of us, when we were much younger, might have bought a policy and putting our sibling or putting our parents, our mother as the beneficiary.

But subsequently, we got married. And we either didn’t change the beneficiary or we forgot to change it. Now, if death occurs, the insurance company may not pay to our parent or may not pay to our sister or our brother. Instead, the insurance company will only discharge their responsibility if they pay to the proper claimant. And in this case, it would be your spouse. Because you are now married and your spouse is truly your next of kin.

Except for two kinds of policies. What are these two kinds of policies whereby beneficiaries will have the right to the proceeds of your policies? Let’s take a look at it.

The two types of policies that beneficiaries have right to would be policies that you bought with NTUC Income as well as insurance policies with nominations under Section 73 of the CLPA or otherwise known as the Conveyancing Law and Property Act.

So if you’ve bought policies with NTUC Income, you can make a nomination and give it to anyone. And if you bought that policy for yourself, for example, you bought an endowment plan, when it matures, you are entitled to the maturity value of these policies. And in the event of your death, your nominees now have right to the proceeds of these policies.

Now, the good thing about the NTUC Income policy is after you make the nomination, it is revocable. At any point in time, you can revoke it. You can change your mind. You can put a new nominee. And you can even replace it with a will. Meaning to say, you can use a will to give the proceeds of these policies, upon your death, to anyone that you want to. That’s for NTUC Income policies.

How about policies that you have bought and you have made a nomination under Section 73? Now, what does that mean?

Now, if you have bought a policy before 1st September of 2009 and you nominated your spouse and/or children as the beneficiaries, then that particular policy is under Section 73. Unknown to you, you have created an irrevocable trust. It cannot be changed. What does that mean? That means to say that you have no more rights to the living benefits. What do I mean?

What that means is that you have, if you have bought an endowment plan, for example, for your own retirement. When the endowment plan matures, the maturity benefit – it does not belong to you anymore. It belongs to your spouse and/or children. And you cannot sue them for it. Because you have irrevocably given the benefits to your spouse or children.

Now, upon your unfortunate demise, your spouse and your children, yes, they have the right to the proceeds of the policy. And like I say, it is irrevocable unless with the written consent from all nominees. And even a divorce, it cannot revoke this nomination. And of course, because you have, well, unknowingly created a trust. This cannot be replaced with a will. You cannot use the will now to distribute this policy unless, again, with written consent from all nominees.

So I know all that sounds really complicated. And it is. Even professionals struggle with it sometimes.

And what makes matters worse is that those people who nominate the beneficiaries before September of 2009, they were quite upset about it because they weren’t told of the implications. And because of that, the law has changed. So what has changed? Let’s take a look.

So on and after 1st September of 2009, there is a new nomination framework via amendments to the Insurance Act. So if you have bought insurance policies through NTUC Income, everything remains the same. You can still nominate anyone. You are still entitled to living benefits such as the maturity value of your endowment plan. The nominees will still get the death benefits in the event of your demise. And yes, the nomination is still revocable and you can replace it with a will.

But now, there are no more nominations made under Section 73. Rather, you have a choice to make a nomination under Section 49 of the Insurance Act. One is Section 49L. And the other one is Section 49M. So if you buy an insurance policy that is not from NTUC Income and if you choose to nominate a beneficiary under Section 49L, you can only nominate your spouse or your children, very much like the old Section 73. You are not entitled to the living benefits of that policy. For example, if the endowment matures, the maturity value belongs to your spouse or children. Upon your demise, only your spouse and your children, they are entitled to the benefit. And the Section 49L policy is not revocable and you cannot replace it with a will unless with written consent from all nominees.

However, if you have bought an insurance policy and you nominate your beneficiaries under Section 49M, then you can nominate anyone. You are still entitled to the living benefits. Upon your demise, your nominees, they will be entitled to the death benefits and now it is revocable and you can easily replace it with a will.

So the challenge now is for you to review your insurance policies, especially if you have bought them before 1st September of 2009. And see how you can take advantage of the previous framework as well as the current framework and make adjustments to your nominations, your will as well as your estate plan.

Thank you for watching this video. And if you feel that you have questions that you may want to ask or if you need some advice, please feel free to reach out to us.


We do not charge a fee at the first consultation meeting. If you would like an honest second opinion on your current estate plan, investment portfolio, financial and/or retirement plan, make an appointment with us today.

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