Insurance & EPF

Can a Will deal with my insurance policies or EPF?

Insurance policies and EPF are governed under separate rules.

With regards to insurance policies, a Will cannot revoke a nomination as per Schedule 10 Section 130 Paragraph 3(2) of the Financial Services Act 2013 (which was previously governed by the Insurance Act 1996). This means that if you have stated in your Will that you would like your insurance policies to be distributed to someone other than those you have nominated in your policy, it will not take effect. If the nominee in your insurance policy is your spouse, child, or parent (if you have no spouse or child at the time the nomination was made) under s.130 paragraph 5(1) of the Financial Services Act 2013 then the nominee will enjoy the insurance money absolutely.

However, if the nominee is other than those mentioned above (i.e. not a spouse, child or parent), under s.130 paragraph 6 of the Financial Services Act 2013 the nominee shall be the executor of the monies and has a duty to distribute the insurance money according to the Will, or if there is no Will according to the Distribution Act 1958 (Amended in 1997).

As for EPF, the proviso in Regulation 7(2) if the Employees Provident Fund Regulations 2001 states that a nomination cannot be revoked by any Will or by any other act, event or means. Therefore, your EPF will be distributed in accordance to the nomination(s) you have made upon registering for the EPF. In a situation where no nomination was given, under Regulation 8, upon death of the EPF member, the Board shall pay any amount standing to the applicant who produces the Grant of Probate, or Letter of Administration, or Distribution Order accompanied with Form EPF 9(AHL), subject to certain conditions

I have nominated my sister in my life insurance policy but was told that my wife and children are the true beneficiaries. Is this true? If so, how do I ensure she gets the money?

Yes, it is true if you do not have a Will as the Financial Services Act states that any person other than spouse, children and parent (if single) will only receive the money in the capacity of an executor and must pass the money back to the deceased estate (or beneficiaries i.e. wife and children in this case). If your parents are alive, they will be entitled to a quarter of the money.

Therefore, if you want your sister to receive the money, you can either assign the policy to her or write a Will in which you name her as the beneficiary to this particular policy.

There are two types of policy assignments – an absolute and conditional assignment. Absolute assignments allow for the complete transfer of rights of the insurance policy to a person nominated by the policy owner (the assignee). However, with an absolute assignment, the policy owner loses all rights and financial interest in the life policy, and should he decide to revoke the absolute assignment, i.e. decide to assign the policy another person, the assignee must give written consent for this to take place. With a conditional assignment, the rights to the insurance policy is transferred to the assignee, however, the assignment will also stipulate that upon a particular event that is not something that can be caused to happen by the policy owner, the assignment can be suspended or revoked in whole or in part.

I have bought a life insurance policy and nominated my spouse as beneficiary. Do I still need to mention it in my Will? Can my Will override this nomination?

If you have nominated your legally married spouse and/or legitimate children as your beneficiaries, you do not have to mention it in your Will. Under Paragraph 3 (2) of Section 130 of the Financial Services Act, your Will can have no effect on overriding this nomination, nor can it be revoked by any other act, event or means.

Recently I purchased a unit trust through my EPF, and wish to know what will happen to these investments if I were to pass on? Will my EPF nominees inherit these investments as well?

In this case, the investments will be lumped into your estate and will not go back into your EPF account. As such it will be distributed according to the Distribution Act 1958 (as amended in 1997) if there is no Will. If there is a will, it will follow as per its instructions.

Thus, to ensure that the rightful nominees receive these investments, a Will must be written to include an instruction naming beneficiaries to these investments.

Will my EPF savings be wiped out if I don’t nominate a beneficiary?

If you have not nominated your beneficiaries:

With regards to EPF, if there is no nomination and depending on the amount of savings in the member’s account, the procedure as determined by EPF will be as follows:

If an EPF member’s EPF savings are less than RM20,000 (as per Regulation 8 (1)).
Initial sum of RM2,500 will be paid to the next of kin. The balance will be paid to the next of kin after a two-month period from the date of the member’s death.

If an EPF member’s EPF savings are more than RM20,000
Initial sum of RM2,500 will be paid to the next of kin. The second payment (not more than RM17,500) will be paid to the next of kin after two months from the date of the member’s death.

The balance of the savings will be paid upon submission of the Letter of Administration / Letter of Probate / Distribution Order / Faraid Certificate to EPF from the party that administers the estates such as Amanah Raya Berhad or the Court or the Land Office, respectively. The process to obtain these documents may be time-consuming and certain fees will also need to be paid. On the other hand, with nomination, no fees need to be paid.

Will my EPF savings be wiped out if I have not updated my beneficiaries?

If you have not updated your beneficiaries:

Take for example, that you have nominated your parents as beneficiaries and have not updated your nominations since. Should one of your parents pass on, the other parent will be the surviving beneficiary. A change in status does not nullify the earlier nomination.

In the scenario above, as the living beneficiary, the parent will receive her portion accordingly. The portion that was bequeathed to the deceased nominee will be invalid and will be subjected to procedures under ‘EPF savings without nomination’ in which the first priority for the right to claim the member’s savings goes to the nearest next of kin or the appointed administrator of the deceased member’s estate. In this case, the living parent will receive 50% of the EPF savings, and the other 50% may be divided among your spouse and children equally (If there are no spouses or children, the surviving beneficiary will inherit 100% of it).

This is precisely why nominating your beneficiaries is very important. You should always ensure that you update your beneficiary whenever there are any major life changes such as marriage, additional new members or the death of a nominated beneficiary.

What if I have a will, but I didn’t make a nomination?

If a nomination is made, a Will cannot override the earlier nomination, according to the Employee Provident Fund Act 1991. However, if no earlier nomination is made, then the distribution of your EPF savings will be in accordance to your Will.