Trustee for life insurance policies

I see that the Financial Services Act 2013 is starting to garnish comments from players in the financial services industry. This one below is from Rockwills Corporation, the leading company in estate planning. What Saw Leong Aun is stating in this newspaper report is that the Rockwills Group of Companies, in particular, Rockwills Trustee Berhad, is best placed to provide life policy owners with a completely viable and safe alternative to appointing a third party as the trustee of the policy owners’ insurance policies. do contact me for further details. Meanwhile, here’s the story:

“So, 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.

“Also, when there is no proper appointment made, the risk is that the new trustee who takes over is not the one the policy owner preferred or trusted,” he added.

Nevertheless, Saw believes that the new rule makes good sense.

“The new rule is good because how can you name yourself as trustee to manage the policy moneys when you are no longer around and before the (life insurance) claims can be effective? Thus in a way, the change in the law is correct but is a small inconvenient (to existing policy owners),” said Saw.

“And at least the objective of buying an insurance, that is, to ensure your insured moneys reach the hands of your children and family is met with a trusted or licensed trustee appointed.”

Still, the new rule is relatively unknown to most policyholders as insurance companies and their agents are only beginning to communicate this with their customers.

An insurance agent, who only wants to be known as Anthony, said so far no timeline has been set for insurance companies to comply with the new rule.

“So, the onus is on the respective insurance agents to contact their customers to notify them of the change in the law,” he told SunBiz.

Meanwhile, Saw sees a business opportunity for Rockwills Trustee Bhd to become a trustee to policy owners’ life policies by setting up insurance trusts.

“Licensed trust companies like Rockwills Trustee will follow instructions as instructed by the person who created the insurance trust. This way, the beneficiaries won’t be able to squander the policy moneys or be cheated of their inheritance.

“We also have full-time in-house legal advisers to support and check all trusts,” said Saw, adding that the awareness on insurance trust among Malaysian policyholders is still low.

What is the fee? Saw said Rockwills Trustee charges a once off fee of average RM1,500 to RM2,000 to set up an insurance trust, which may include as many life policies as you wish.

“And where the policy owner dies and we act as trustee, our fee is 0.75% of the total insurance moneys or a minimum fee of RM2,000 a year during the holding years. We normally put the balance policy moneys into fixed income investments such as fixed deposits and the money market, and any interest earned will go back to the trust fund and the beneficiaries,” he added.

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