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Source:
www.mas.gov.sg |
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MAS Invites Comments on Proposed
Nomination of Beneficiaries Framework |
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The Monetary Authority of Singapore (MAS)
has released a consultation paper on a proposed framework for the
nomination of beneficiaries in respect of the proceeds of insurance
policies. |
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Presently, there are no provisions in the
Insurance Act to govern nomination of beneficiaries. |
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Instead, a nomination by a policyholder of
his spouse and/or children will automatically create a statutory trust
in favour of the spouse and/or children governed by section 73 of the
Conveyancing and Law of Property Act (CLPA). |
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The creation of a statutory trust
effectively causes the policyholder to lose all rights to and control
over the policy. This means that without the consent of all the
beneficiaries, he cannot make any change to his nomination or the terms
of the policy. |
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There have been concerns over the apparent
ambiguity and inflexibility in the application of section 73 of the CLPA to
insurance policies. |
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With increasing public awareness of the need
for long-term financial planning and changes in family circumstances,
policyholders also desire greater flexibility with regard to how their
insurance policy proceeds are to be disbursed. |
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In view of the above, MAS proposes to amend
the Insurance Act to bring under its purview the nomination of
beneficiaries in respect of the proceeds of insurance policies. |
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The new framework will be based on the
principles of flexibility and clarity. Section 73 of the CLPA will be
correspondingly repealed. |
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The key recommendations of the new
nominations framework are: |
- The new framework will apply to all
insurers and policyholders.
- Only life and personal accident
insurance policies will be eligible for nomination.
- A policyholder will have the choice,
at any time while his insurance policy is in force, to make a
revocable nomination, an irrevocable nomination or no nomination at
all.
- A revocable nomination will preserve
the policyholder's ownership of his insurance policy. Beneficiaries
will only receive those policy proceeds paid out upon the
policyholder's death; proceeds paid out during the policyholder's
lifetime will go to him. Hence, should illness or disability befall
the policyholder, he will be able to use the policy proceeds to meet
his own financial needs.
- An irrevocable nomination will create
a statutory trust in favour of the beneficiaries i.e. the
policyholder's spouse and/or children. This will be the same as the
current trust created under section 73 of the CLPA. The trust will
generally protect the policy proceeds from the policyholder's
creditors, and these proceeds may be considered a separate estate for
the purposes of calculating estate duty. At the same time, the
policyholder loses all rights to and control over the policy. Any
changes to the nomination and/or policy will require the consent of
all the beneficiaries. All policy proceeds from an
irrevocably-nominated policy will go to the beneficiaries.
- Policies paid for in whole or in part
with Central Provident Fund (CPF) monies i.e. Central Provident Fund
Investment Scheme (CPFIS) policies will be eligible for revocable
nominations only.
- Prescribed statutory forms must be
used for the purposes of nomination.
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The proposed framework will apply to
policies incepted after the Insurance Act amendments come into force. |
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New nominations made to a policy which was
incepted prior to the amendment will be recognised under the new
framework only if the policy is not already encumbered by other legal
obligations. For example, if a policyholder had already created a
statutory trust over his insurance policy under section 73 of the CLPA,
he would not be able to change his nominations under the new framework
unless the consent of all existing beneficiaries were obtained. |
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MAS invites comments on the recommendations
set forth in this consultation paper, which can be found on the MAS
website (Click
here to view the Consultation Paper). Comments may be submitted to
nobreview@mas.gov.sg by 18
January 2006. |
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Source:
www.mas.gov.sg Press Release 7 Dec
2005 |
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FrontPage Edition: Sat 10 Dec 2005
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