“Wilfred, now that we can nominate an insurance policy without making it an irrevocable trust, should it be good news for the man in the street? Regards - K”

Dear K,

The Government doesn’t know anything about estate planning and has no practical experience dealing with the man in the street. If a person wishes to do a nomination without the need to do an irrevocable trust, he or she should do that via his Will. The reason is a practical one. If you have 5 insurance policies, you have to keep track of 5 different nominations. However, everybody’s financial goals changes all the time. Your initial nomination may not be what you want a few years down the road. So you need to update your nominations again.

After being sold some useless plans down the road it is very possible to accumulate more than 10 or even 20 insurance policies if you count your spouse and yours together. Don’t forget those investments-linked and single premium endowments are also included! So how to keep track of so many nominations?

An easier way to do is to just do away with all the nominations and have a Will written. If there is a need to update it, just update the Will. You only have 1 valid Will per person. The previous Will is invalidated by the latest one. For administration purposes, it is much easier to keep track of one piece of paper than to keep on calling the insurance companies for their latest record of who are the beneficiaries.

Financial planning must have one rule – simplicity. Buy simple products and make life simple. Don’t do these useless nominations and get yourself into confusion.

Nevertheless, the new nomination framework is quite useful. It is useful for insurance agents who do not do proper estate planning. Insurance agents can now ensure that the insurance policies they sold will go to the intended person. This piece-meal approach to estate planning will be embraced by product sellers. Product sellers will not want to do a more wholistic approach to estate planning because there is no commission to earn for doing a proper plan. Filling up a nomination form is much easier and you don’t need to do any analysis unlike proper estate planning. However, from a professional estate planning perspective, it can be detrimental to the client because of the difficulty in keeping track as mentioned above.

I always believe that everyone must be capable of handling their financial affairs. They must not over rely on others like their insurance agents and financial advisers. One day, their insurance agents and financial advisers will either resign or die. Therefore, it is important for individuals to have a simple financial structure that they can remember and keep track themselves. I have many clients who cannot even remember to pay their insurance premiums. Come on, how on earth is anyone going to remember to whom they nominate what policies? For all my clients, my principle is very simple. No toxic products, no toxic nomination. Simply have your Will written … and make sure the Will is simple to understand too!

The above comments are pertaining to revocable nomination. Will think about the irrevocable nomination on another day.