9.4 Executor Nominations and Nomination Changes

Study Focus

A non-trust nominee receives the money as executor rather than automatically beneficially. Muslim conventional-life nominations have distinct estate-distribution implications.

Legal Effects of a Non-Trust Nomination

1. Nominee receives as executor (Paragraph 6(1)): The nominee receives the policy moneys as an executor and not solely as a beneficiary. The insurer is discharged once it pays the nominee.
2. Part of the estate: The moneys form part of the deceased's estate and are subject to the deceased's debts.
3. Distribution (Paragraph 6(2)): The nominee distributes the money in the course of administering the estate, according to the deceased's Will, or if there is no Will, the law of distribution that applies to the deceased: the Distribution Act 1958 for non-Muslims or Faraid for Muslims.
4. Making the nominee a beneficiary (Paragraph 6(3)): If the policy owner has assigned the policy benefits to the nominee, as the nomination form warns under Paragraph 2(4)(a), the nominee receives the money solely as a beneficiary.

Why Nominate an Executor-Nominee?

A Paragraph 6 nomination still speeds up payment: the insurer can pay the nominee directly without waiting for a Grant of Probate or Letters of Administration, and the nominee then settles debts and distributes the balance to the lawful heirs.

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Revocation of Nominations (Paragraph 3)

How a Nomination Is Revoked

A nomination, including a trust nomination, is revoked only:

1. On the death of the nominee, or of all the nominees if there are several, during the policy owner's lifetime;
2. By written notice from the policy owner to the insurer (with the trustee's written consent for a trust nomination); or
3. By a later nomination.

What Does Not Revoke a Nomination

Paragraph 3(2) states that, subject to these three methods, a nomination is not revoked by a Will or by any other act, event or means. A later Will that leaves the policy to someone else does not override the nomination, and a later marriage does not cancel it. A policy owner whose circumstances change should make a new nomination.

When One of Several Nominees Dies First (Paragraph 3(3))

If one of several nominees dies before the policy owner and the owner has not made a new nomination for that share, the insurer pays the deceased nominee's share to the remaining nominees in proportion to their respective shares. For example, if Encik Rahman nominated his wife (60%), son (30%) and daughter (10%) and his daughter dies first, the wife receives 6/9 and the son 3/9 of the policy moneys.

If the Nominee Does Not Claim (Paragraph 4)

If a nominee does not claim within 60 days of the insurer becoming aware of the policy owner's death, the insurer must write to the nominee about the entitlement. If the nominee still does not claim within 12 months, the insurer pays as though no nomination had been made (Paragraph 8).

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Nomination for Muslim Policy Owners and the National Fatwa Council

In multi-ethnic Malaysia, the interaction between statutory insurance law and Islamic jurisprudence (Syariah) is an important syllabus topic.

The National Fatwa Council Ruling

The National Fatwa Council for Islamic Religious Affairs Malaysia (Majlis Fatwa Kebangsaan) has ruled that a nominee named by a Muslim policy owner receives the proceeds as an executor (wasi), consistent with Schedule 10 excluding Muslim owners from Paragraph 5 trusts:

1. Nominee as Wasi (Executor): When a Muslim policy owner names a nominee, even a spouse, child or parent, the nominee receives the policy proceeds as a wasi (executor or administrator), not as the beneficial owner.
2. Faraid Distribution: The nominee must collect the policy moneys, pay the deceased's debts and funeral costs, and distribute the balance among the lawful heirs according to Faraid (Islamic inheritance law).
3. Nominee Cannot Exclude Other Heirs: A Muslim nominee who keeps the proceeds and excludes other Faraid heirs breaches their duty and may be pursued by the other heirs.
4. Hibah as an Alternative: A Muslim policy owner who wants a particular person to receive the benefits outright can use a hibah (gift), for example by assigning the policy to that person, and family takaful certificates commonly offer conditional hibah arrangements under the Islamic Financial Services Act 2013 (IFSA 2013).