Policies purchased under MWP Act, 1874 – 3

 Policies purchased under MWP Act, 1874 – 3

Any Trust is managed by Trustees appointed as per the Trust deed and rules. What really happens is the policy moneys now cannot be touched by the policyholder. That is why this policy is beyond the reach of the creditors of the policyholder. We have now three parties, viz. the policyholder, the Trust & Trustees and the beneficiaries.

It is the duty of the trustees to protect the interests of the beneficiaries. It is very important, therefore, to make a proper selection while appointing the trustees. The Act provides that if no trustee is appointed by the policyholder the Official Trustee of the State shall be the trustee for the Trust. Several banks have intimated their willingness (for e.g. State Bank) to LIC to act as Trustees of LIC policies. List of such institutions that have consented to be Trustees of LIC policies is available in LIC’s Manual on MWP Act. I am not aware whether such consent is available with other private insurance companies. The third option is to appoint individual/s as trustees.

You can have thus any from the three types of trustees – official, institutional or individual/s. In any case remember that your policy money will be dealt by the trustee/s while you are alive or dead. So always select totally dependable persons who have a natural and real interest in the well being of your family and children.

One of the main problems I have found in real experience is that while selling the policy a trustee is appointed somehow, the priority is on selling the policy. Please do not do that. There shall be a condition in the rules that the policyholder retains the right to appoint another trustee if the present trustee dies, is in prison, or resigns or is in a foreign country not capable of acting as a trustee or is incapable of acting due to old age, illness etc. If this right is not retained it may require court’s intervention for making changes and authorizations in the trust especially when some of the beneficiaries are minor.

But let me tell you sec.6 (1) of the MWP Act, 1874 opens a mine of new insurance business before you. Today people need protection for their money along with that for their dependents. While the protection u/s 60(1) (kb) of Civil Procedure Code is available to ‘judgment debtors’ the protection of sec. 6(1) is available to the beneficiaries of anyone who purchases a policy under that section. Learn all about the Section, Trusts and Trustees. Businessmen, industrialists, traders, landlords and estate owners – even those people who have taken loans from financial institutions on the strength of their property - all have an interest in creating a separate protected property for their family and children. To them the answer is life insurance policy u/s 6(1) of the MWP Act, 1874. We shall continue this discussion.

Key words:

MWP Act, 1874

Trust Deed

Trust Rules

Trustees