I had a relative. His name was Fred. He passed on lately due to an accident. 

During his funeral, Jackson, our friend who serves as Fred’s insurance agent was present and approached Sally, Fred’s then girlfriend, to discuss his life insurance policy which Fred had purchased two years ago. The sum assured of his policy is RM 500,000. Fred has nominated Sally as his sole nominee of his only policy. 

Fred left behind his mother and two younger sisters. Mei Li, our cousin who also is a life insurance agent had approached Sally and had advised her to repatriate the full sum assured to Fred’s mother. Sally was very displeased and has refused to hand over the RM 500,000 upon receiving it from Fred’s insurer. Thus, here is a question: 

‘Could Sally collect and keep the RM 500,000 in her bank account?’ 


It depends. 

First, if Fred had assigned the life insurance policy to Sally, she is able to receive the RM 500,000 from Fred’s insurer and retain it legally. Sally is not required, by law, to transfer the money to Fred’s mother if she chooses not to. 

Second, if Fred failed to assign his policy to Sally, Sally would still be required to collect the RM 500,000 from Fred’s insurer. But, Sally is required to keep it as its executor. She could not use or spend the money as she wished to. This is due to the fact that Fred’s insurance policy is a non-trust policy. 

Subsequently, upon collecting RM 500,000, Sally is tasked to pay off all of Fred’s outstanding debt and taxes. This include all of his unsettled car loan, credit card debt, education loan, personal loan, mortgage, business loan, tax liabilities, and so on and so forth to all of his creditors, bankers, and the government. 

Next, from its balance amount, if any, Sally shall distribute it in accordance with Fred’s testacy status. For instance, if Fred has a written will, then, Sally is tasked to distribute it to the nominated beneficiary in his will. If Sally is included as the only beneficiary in Fred’s will, Sally could keep all balance amounts for herself. 

But, if Fred passes on without a will (intestate), Sally is then required to transfer the remaining sum to Fred’s mother in full. Upon the transfer, Sally’s task as the executor of Fred’s sum assured shall then be completed. Sally would not inherit a single ringgit from Fred’s insurance policy despite being nominated as his only beneficiary in the policy. 

What if Sally Chooses to Keep and Spend the Money as She Pleased? 

And, let’s assume, the policy was not assigned to her. So, what will happen? 

First, if Fred’s estates, inclusive of his cash, property, belongings … etc could not settle his outstanding debt and taxes, Fred’s creditors and the government shall approach Sally for their shares in Fred’s sum assured. If Sally refuses to settle all of these liabilities with Fred’s sum assured, she may face legal action. 

Second, if Fred’s debt and taxes were settled by his estates and Fred’s mother is one who wishes to inherit the money, then, she will pursue the matter by suing Sally for her reluctance of releasing the money to Fred’s mother. 

As such, Fred’s sincere intention of blessing his girlfriend can turn ugly and be a curse or nightmare to her. 

But, How Can it Be? 

If you are Sally, you may wonder, ‘How can this happen? 

After all, Fred has nominated Sally to be his only beneficiary in his life insurance policy. Understandably, in Fred’s case, his life insurance policy was purchased: 

a. Without the knowledge between a trust and a non-trust life insurance policy. 

b. Without Sally, being aware of her role as an executor to the sum assured. 

c. Emotionally to demonstrate Fred’s undying love to Sally. 

It is also possible that Jackson, Fred’s life insurance agent, had failed to educate Fred and Sally on the assignment of Fred’s policy to Sally to guarantee Sally her inheritance on the full sum assured of his life insurance policy. Possibly, this can be due to a lack of knowledge and experiences in the subjects of nomination of life insurance policies and estate planning from Jackson. 

If Fred Wants to Play Romeo … 

Then, he should just assign his life insurance policy to Sally. Period. 

Of course, Fred’s decision of buying his life policy and nominating Sally to be his sole beneficiary is most likely an emotional one as it is not well thought of. 

This is because, logically speaking, some relationships just do not work out. The thing is, ‘What if Fred survives and decides to part ways with Sally and Fred had already assigned his life insurance policy to Sally?’ 

Can’t Fred just cancel his policy?

The answer is nope. Despite Fred being the life assured and the payer to his life policy, he needs Sally’s permission to cancel the policy. Yeah, I know … It kind of sucks. Thus, this means, if Fred decides to assign a policy to Sally, he must know that he would be paying for a life insurance policy even if Sally chooses to break up with him in the future. 

It is Fred’s permanent gift to Sally. 

A More Practical Approach for Fred

Like Fred, you may buy an insurance policy in advance as its premium is lower. I totally get it. But, the question is, ‘Is there a way for Fred to buy his policy and: 

a. Nominate Sally as his beneficiary if Fred and Sally are still in a relationship,

b. Nominate Fred’s mother and his two sisters if their relationship failed,

c. Determine the frequency and amount of distribution to his beneficiaries, 

in the event when Fred passed on prematurely. The answer is Yes. This involves setting up a simple insurance trust. Here is how it works: 

a. Fred buys his life insurance policy. 

b. Instead of Sally, Fred assigns his policy to his own trust. 

c. Fred nominates Sally as his primary beneficiary. 

d. Fred can nominate his mother and two sisters as his secondary beneficiaries. 

e. Fred can state his conditions for Sally to receive the sum assured. 

f. If Sally fails, the money will be distributed to his secondary beneficiaries. 

g. Fred can state other conditions to manage the sum assured if necessary. 


Financial planning is great for couples to not only handle their finances but also to strengthen their relationships. It is advisable for couples to have meaningful, open, and candid discussions on their financial life so that they can work as one team to achieve their financial goals. 

Estate planning is an important element of the topic that also is to be discussed with your loved ones. If that’s you, you could start by first booking a 30-minute consultation session with our estate planning consultant where you’ll be given practical tips, ideas, and strategies to safeguard the financial future of both you and your partner. You can do so by by filling up the details below: 

Jocelline Chee
Jocelline Chee

As a Full-time Senior Professional Estate Planner, Jocelline seeks to understand every client’s unique asset holdings and legacy wishes, before recommending a suitable Will and/or Trust structure to meet their needs. She is well-equipped to point out various blindspots in Legacy Planning, that her clients may have. With Jocelline, you can be assured that your legacy planning journey will feel more like having an open-hearted coffee session with a trusted friend, as compared to a formal and awkward session with an equipped advisor.

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