Why and how do you need to appoint a nominee and/or trustee for your insurance policies and EPF?
Updated: July 26, 2017
What is a Nominee?
Life insurance helps ensure that your loved ones are protected financially should anything happen. You will want your loved ones to be able to access these funds as soon as possible.
By appointing nominee(s), the policy moneys can be disbursed much faster without the need to obtain the Grant of Probate or Letter of Administration or Distribution Order. Without a nomination, your insurance company is not obligated to release the policy money until these documents are obtained, which may take up to a few years.
How do I appoint a Nominee?
This is done by submitting a Nominee form through your insurance company.
If you have more then one Nominee, you will need to state the share per Nominee.
E.g. Beloved spouse 50%, Ah boy 25%, Ah girl 25%
Is there a minimum age for my nominee?
For non-Muslims no minimum age. However if your nominee is a minor, the funds would be held by your trustee.
For Muslims, claims by nominees below 18 are invalid as per Nomination Policy (effective Jan 1, 2017).
Do I need to write my insurance policy Nominee(s) in my will?
If you have already appointed your insurance Nominee(s), you do not need to write your insurance Nominee(s) in your will. (This is similar to appointing your EPF Nominees).
I am a Muslim policy owner. Should I still make a nomination?
Yes, a Muslim policy owner may still make a nomination to ensure that the policy moneys can be distributed faster. The Nominee of a Muslim policy owner receives the policy moneys only as an executor and distribution must be in accordance with Islamic laws. In the event that there is no nomination, the policy moneys will go to the Public Trustee and therefore may take sometime to distribute.
As a Muslim, you can opt to give the insurance policy as a gift (hibah) while you are still living to ensure that he/she receives it’s benefits.
For a EPF nominee however, it is considered a gift and is given directly to the nominee. This can be done with an insurance policy assignment.
What if your nominee dies?
If you are still alive, the eligible portion will go to your next-of-kin.
If you have passed away, the eligible portion will go to your nominee’s next-of-kin.
What if BOTH you & your nominee(s) all die together?
If EPF savings < RM25,000:
- Initial sum RM2,500 paid to next-of-kin
- Balance paid after 2 months from death
If EPF savings > RM25,000:
- Initial sum RM2,500 paid to next-of-kin
- 2nd payment of up to RM17,5000 paid after 2 months from death
- Balance paid upon submission for Letter of Administration/Letter of Probate/Distribution Order/Faraid Certificate (costs may apply)
What is the deadline for submitting claims application?
For EPF, within 1 year from death. Else will proceed as if no nomination was made
What is a Trustee?
A Trustee is an individual person or member of a board given control or powers of administration of property in trust with a legal obligation to administer it solely for the purposes specified.
What is a Trustee’s obligations?
In discharging his/her duties, a Trustee must exercise the utmost diligence & a Trustee would be personally liable if there is any breach of trust. Examples of a Trustee’s duties include:-
- Duty not to profit from trust
- Duty to be impartial
- Duty to account
- Duty against a conflict of interest or self dealing
What are the requirements for a Trustee?
Above 21 years of age of sound mind.
Can a Trustee be a foreigner?
Yes. A Trustee can be a non-Malaysian. However, you would want to ensure that your Trustee is long-term in Malaysia else would need to travel to Malaysia & may cause delays in estate proceedings.
Can my Nominee be also my Trustee?
Yes. Please check with your insurance provider, bank or relevant party for more details.
Must I appoint a Trustee?
You may opt not to appoint a Trustee (Only appointing a Nominee). If unsure, please consult your advisor.
As of 30th June 2013 with FSA 2013, you may no longer appoint yourself as a Trustee in an insurance policy.
FINANCIAL SERVICES ACT 2013
INVALIDATION OF SELF APPOINTED TRUSTEE
With reference to the new Financial Services Act 2013 (FSA 2013) that came into operation on 30 June 2013, we wish to bring your attention to Schedule 10 Section 130 Paragraph 5 (3) which states:-
5. (3) The policy owner may, by the policy, or by a notice in writing to the licensed insurer, appoint any person other than himself to be trustee of the policy moneys and where there is no trustee appointed –
(a) the nominee who is competent to contract; or
(b) where the nominee is incompetent to contract, the parent of the incompetent nominee other than the policy owner and where there is no surviving parent, the Public Trustee or a trust company nominated by the policy owner, shall be the trustee of the policy moneys and the receipt of a trustee shall be a discharge to the insurer for all liability in respect of the policy moneys paid to the trustee.
How does this affect me?
You will need to appoint someone you trust as your Trustee. It makes sense in a way that you cannot appoint yourself as you would usually want a Trustee when you are not around/capable to act as one.
However, it may cause complications if you want to change your Nominee at a future date. Your Trustee would need to confirm the change of Nominee, sign forms & submit a IC copy. Unless it is from a sibling to your parents/spouse/children then Trustee approval is not required. You can also check with your insurance provider if you can opt not to have a Trustee.
What if I submitted a policy after 30th June 2013?
You should be advised to appoint a new Trustee as your self-appointment is invalid.
What if I have a previous policy before 30th June 2013?
No change is necessary, unless you wish to do so.