Naming Trustee Under Life Insurance

Policy owners and insurance companies have an inevitable headache looming, as they scramble to make sure they comply with a new rule which stipulates that policy owners can no longer name themselves as the trustee to their life policies. This applies to both new and existing policies. 

Under Schedule 10 of the new Financial Services Act 2013 (FSA), which came into force on July 1, 2013, it is stated that policy owners "may appoint any person other than himself to be trustee of the policy moneys". (This wasn't the case under the previous Insurance Act 1996).

In the past when a person buys a life policy and names his spouse or kids as a beneficiary, he would usually appoint himself as the trustee. But because of the change in the law, they can no longer do so. Potential problems may occur in situations where the spouse of the policy owner doesn't want to be appointed the trustee and their children, as beneficiaries, have yet reach the legal age of 18 years.

If the policy owner dies and his children are still minors, the policy moneys would automatically be held by Amanah Raya Bhd (as the country's public trustee) until the children reach 18 years of age or unless there is a competent trustee available to take over.