Married Women Property Act, 1874
The Married Woman Property Act (MWP) can protect the life insurance death claim benefit from creditors and ensure that your wife and children are secured. Lack of awareness and loss of control prevents insured from going for this option. Find out how you can benefit from it.
Ramesh was running business on borrowed capital. After his sudden demise, his creditors did their best to go after Ramesh’s assets. Luckily for his wife, Ramesh had purchased a term life insurance policy choosing the option of Section 6 of the MWP Act. It ensured that Ramesh’s wife got the death benefit. But many are not so lucky due to lack of awareness of such a feature available with your life insurance policy.
Today, buying on credit has become common place. As a responsible citizen you should make payments during your lifetime on any loan, credit card, outstanding debt payment, etc. but, it also makes sense to ensure that your wife and children really get the death benefit from your life insurance policy.
Section 6 of the MWP Act allows an individual to buy a policy for himself under the Act and create a trust for the same. There is no need for creating a trust under the Trust Act. The beneficiaries (wife and/or children) can also be trustees. Even a married woman being a widow can buy MWP policy on her name with her children as beneficiaries.
A resident Indian being a married man, can take an insurance policy under the MWP Act. A widower or a divorcee – in such a scenario can name their children as beneficiaries. The procedure is simple, but it has to be done at the time of buying the policy. At the time of making the application, a separate form has to be filled by the proposer for it to be covered under MWP Act. The form seeks details of the beneficiaries, the share of the benefits that are to be accrued to them and the trustees.
The beneficiary under the MWP Act in life insurance could be :
- The wife alone
- The child / children alone (both natural and adopted)
- Wife and children together or any of them
Each policy under MWP Act is considered as a separate trust automatically. At the time of the proposal, the proposer has to mention the names of the beneficiaries. Proposer may also mention the names of trustees.
If the beneficiary is a minor then the appointment of the Trustee is compulsory. Trustee cannot be a minor or a Hindu Undivided Family. Also, the proposer can neither be the beneficiary nor the Trustee. The Beneficiary and the Trustee can be the same person.
The trustees can be the wife and/or one or more of his adult children. The policy holder has the option to change the trustees at any point in time. However, the beneficiaries of the plan once declared cannot be changed. In case of divorce, the wife continues to remain a beneficiary and cannot be changed.
Advantages of MWP Act.
- Financial security of wife and/or children.
- Beneficiaries are financially secure in case of debt accumulated by policyholders.
- Beneficiaries are financially protected against creditors claiming benefits for repayment of loan or debt.
- Beneficiaries are financially stable in case joint family property goes into dispute. They are also protected from greedy relatives.
- In case a policyholder, who is the sole breadwinner in the family, passes away unexpectedly, beneficiaries are not left penniless and are safe enough to maintain their living standards.
What are the drawbacks?
- The policyholder of a MWP policy loses all control over the policy with the exception of paying premiums. The policy becomes a trust property. (wife and/or children)
- There can be no changes to the policy without the consent of the beneficiaries.
- The beneficiaries of the plan, once declared, cannot be changed at any time.
- The proposer cannot take any loan or assign the policy to another person.
- The policy maturity, surrender value will go to the trust (and hence the beneficiaries only).
