Report No. 66
15.6. Nomination and trust.-
The point which arises out of the proviso to section 39(7) of the Insurance Act, quoted above1 may be thus stated. A person who decides to create a trust under section 6 may, by misunderstanding of the law or through slip or ignorance, enter also a nomination in the policy. In such a case, what should prevail is the trust under section 6, and not the nomination. However, as the proviso to section 39(7) now stands, it is possible to take the view that the nomination overrides the trust. In our opinion, it is desirable to prevent such a situation from arising, and an amendment to section 39(7), proviso, Insurance Act, on this point is, in our opinion, desirable.2
We are also of the view that it is desirable to insert, in the policy, a specific note, impressing it upon the insured that if he creates in trust under section 6, he shall not make a nomination under section 39 of the Insurance Act. We are proposing a suitable provision on this point in the new section 39A, Insurance Act3 which we are recommending. Besides the points stated just now, section 39(7) of the Insurance Act will require another change so as to add a mention of 'children. This change is consequential on our recommendation to expand the-scope of section 6 of the Act of 1874 so as to authorise a trust for children. To give effect to the above propositions, we recommend that sub-section (7) of section 39 of the Insurance Act should now be revised as follows:
"(7) The provisions of this section shall not apply to any policy of life, insurance to which section 6 of the Married Women's Property Act, 1874, applies or has at any time applied:
Provided that where a nomination made whether before or after the commencement of the Insurance (Amendment) Act, 1946, in favour of the wife of the person who has insured his life or of his wife and children or his children or any of them is expressed, whether or not on that face of the policy, as being made under this section, the said section 6 shall be deemed not to apply or not to have applied to the policy:
Provided, however, that where, in respect of the moneys payable under any policy of insurance, the insured has created a trust under section 6 of the Married Women's Property Act, 1874, and also made a nomination, then the nomination, whether or not it refers to this section, shall prevail be disregarded."
1. See also para. 8.54, supra.
2. See para. 15.7, infra.
3. Para 8.42, supra.