In estate planning, the relationship between a will and insurance policy nominations is often a source of confusion. This article explores whether a will can override nominations made in insurance policies. We’ll examine legal exceptions, case studies, and provide guidance for aligning your estate planning documents effectively.
Can Will Override Insurance Nominations?
Yes, a will can override an insurance nomination, but there are exceptions. If the insurance nomination is irrevocable, such as those made under Section 49L of the Insurance Act, or if there’s a specific assignment, the will cannot override these nominations. Otherwise, the instructions in the will generally take precedence over previous insurance nominations.
The Interplay Between Wills and Insurance Nominations
Understanding Insurance Nominations
Insurance nominations are directives within insurance policies where policyholders name beneficiaries for the policy proceeds. These nominations are crucial in ensuring that the benefits of life insurance policies are distributed according to the policyholder’s wishes.
The Role of a Will
A will is a legal document that outlines how an individual’s assets should be distributed after their death. It encompasses various assets, including real estate, personal belongings, and financial instruments.
Can a Will Override an Insurance Nomination?
The General Rule
Typically, a will can override an insurance nomination. This means if a policyholder names a beneficiary in their insurance policy but later specifies a different beneficiary in their will, the instructions in the will take precedence.
Exceptions to the Rule
However, there are notable exceptions. For instance, if an insurance nomination creates a “Nomination under Section 49L Insurance Act” or involves a specific assignment, it may not be overridden by a will.
An irrevocable nomination, often found in policies under Section 49L, signifies a permanent assignment of benefits to the named beneficiaries. These nominations cannot be changed by a will.
Policies Before 2009
For policies issued before September 1, 2009, different rules apply. If beneficiaries are spouses or children, an “implied trust” is created, making the nomination irrevocable.
Case Studies and Legal Precedents
The Impact of Implied Trusts
A landmark case illustrating the concept of implied trusts involved a policyholder who named his spouse and children as beneficiaries. The court ruled that this created an irrevocable trust under Section 73 of the Conveyancing and Law of Property Act (CLPA), effectively transferring the policy’s ownership to the beneficiaries.
Section 49L Insurance Act
The introduction of the Section 49L Insurance Act on September 1, 2009, marked a significant shift. This act allowed for irrevocable nominations, providing a clear legal framework for these types of beneficiary designations.
Prevalence of Policies Under Implied Trusts
Before the 2009 legislation, hundreds of thousands of policies were likely under Section 73 implied trusts. Many policyholders might not be aware of this, as the creation of these trusts required no formalities.
Best Practices for Policyholders
Regular Review of Nominations
It’s advisable for policyholders to regularly review their insurance nominations, especially after major life events, to ensure they align with their current wishes.
Aligning Wills and Insurance Nominations
To avoid confusion and potential legal disputes, it’s crucial to ensure that wills and insurance nominations are consistent.
Seeking Professional Advice
Given the complexities, seeking advice from legal and financial professionals is essential to understand the implications of specific situations.
The relationship between wills and insurance nominations is complex and requires careful consideration. While a will generally overrides an insurance nomination, exceptions exist, making it vital for individuals to stay informed and seek professional guidance.