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Wednesday, 25 April 2018

Estate planning: Making it easier for our parent to receive the insurance payout




This post is trigger by wanting to make sure parents have a peace of mind if a person have to leave the world for a better place and will be focusing on Insurance Nomination.

This will also be more hassle free for the trustee if he/she is the spouse.
Not everyone (the trustee) is in a condition to execute a Will when he/she have to accept a love one is gone.




The plan is to allow the parents to receive the benefit/proceeds without a trustee.

It could be done with

a) the deceased death certificate
b) the parents/nominee's ID card at the Insurance company counter
(If an agent is not available, just in case, good to be prepare.)



Before we continue, we need to know for insurance nomination there are
1) Trust Nomination
2) Revocable Nomination

I like to keep things Simple so readers benefit from it so I won't go into a lot of details rather more on the pros and cons.

1. Trust Nomination

Pros
a) Only Spouse and/or children can be nominated (Sadly, parents are not allowed)
b) Will have no impact on this Nomination (pros in this case, straight forward to get the proceed)
c)  The BEST reason is policy proceed is protected against claims from creditors in the event of bankruptcy!

Cons 
a) Basically, the insured (You) who pay for the policy does not retain control over the policy anymore.

b) Very tough to change nomination unless all the nominees consent to it.
(That is if you change your mind to give it to a family member who needs the proceed more)

c) Nominees get living benefits
(Living benefits are claims like injury claims the insured sustained and by right should get the proceeds instead of another party)

d) Requires a Trustee



2. Revocable Nomination

Pros
a) The insured (You) retain the control over the policy.
b) The insured (You) gets the living benefits.
c) Nominess only get the death benefits
d) The insured (You) can change the nominees at anytime the proper way.
e) The insured (You) can nominate your Parents and hopefully not some mistress.
f) Will have no impact on this Nomination ONLY when this nomination is done after the Will and have informed the insurance company.
g) The BEST reason is trustee is not required and become hassle free for parents to get the proceed.

Cons 
a) The worst decision is to nominate to your mistress
b) The worst cons is the proceed is NOT protected against claims from creditors in the event of bankruptcy!



Please note I am not in the Insurance Industry and I did not touch on the shares allocation or what happened if the nominees or trustee passed on before the insured.

My advice is to get your facts right with the right officials before you proceed in submitting your nomination forms.

Another Good Deed Done!

1 comment:

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