INSURANCE NOMINATION VS WILL WRITING
Estate planning is a critical step in leaving a legacy for your family and friends after your demise. However, most persons put off doing this for a host of reasons, most popular of which is does not want to entertain the notion of death but some persons are just not clear on how to go about it, familiar with the terms in estate planning or what is what. This blog post addresses those issues.
Insurance nomination is the process of the policyholder selecting an individual who receives the insurance benefits in case of death of his demise, giving him a valid discharge on settlement of a claim under life insurance policy. Writing a will, on the other hand, is the process of drafting a legal document which a person, the testator, expresses his wishes on how his estate is to be distributed on his passing and names one or more persons, the executor, to manage the estate till its final distribution. A will is all encompassing; therefore, an insurance nomination can be found within a will.
Trust nomination is the process of selecting an individual whose job is to oversee and manage a trust set up by the testator. A trust usually takes effect from the moment the trust is created by the testator and continues after his demise. A revocable nomination, on the other hand, is an agreement which allows the policymaker to nominate beneficiaries to receive death benefits of the policy upon the passing of the policy owner. In a revocable nomination, all living benefits are paid to the policy owners and only the death benefits go to the surviving beneficiaries. When there is no surviving beneficiary, the revocable nomination is deemed revoked.
Other differences between a trust nomination and a revocable nomination include:
- In a trust nomination, the nominees get both the living and death benefits while in a revocable nomination, the life benefits are paid to the policy owner and the nominees get only the death benefits.
- In a trust nomination, the nomination can be revoked only if a trustee who isn’t the policy maker gives consent or if all the nominees give permission. In a revocable nomination, the nominees can be changed at any time by the policy maker.
- In a trust nomination, only the spouse and children can be nominees while in a revocable nomination, any legal entity but an animal can be a nominee.
- A will has no impact on earlier trust nominations while in a revocable nomination; a will revokes the earlier revocable nomination.
- In a trust nomination, if the nominee dies before the policy maker, his estate passes to the estate of the deceased nominee while in a revocable nomination, if only one nominee is named, the nomination is revoked; in all other cases, the surviving nominees share in the deceased’s portion.
Making a nomination isn’t compulsory. However, having one provides the policy owner with an affordable and legal means of distributing his benefits to his nominees. If no nomination of will was made, the insurance company pays up $150,000 of the policy proceeds to whoever is considered a proper claimant in accordance with section 61 of the Insurance Act. Any other amount above $150,000 is then paid to the executors named under a grant of probate.
Making a will is very important, and when doing this, it is important to engage an estate planner to help you write the will. There are several aspects of an individual’s estate which have varying rules on their administration. Insurance nomination is the nomination of a person who would benefit from the proceeds of the policy makers insurance. Insurance nomination just like a trust nomination and a revocable nomination needs expert advice when they are being drawn up, and an estate planning service can help provide a holistic view of an individual’s estate.
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