Married Women’s Property Act 1874

The purpose for which we take we take a life insurance policy is, to fulfil one, some or all of the following needs: when we are alive, to meet:

• Financial milestones like children’s education, marriages, repayment of debts, our self reliant retired life, spouse’s retirement income or old age needs and the like.
• The capital needs, such as repayment our debts, mortgages, family provisions providing a reasonable substitution of the income towards our last drawn income to which our family was accustomed to before our death, some provision for surviving spouse in form of monthly pensions and the like.

In short life insurance covers the basic two risks of ‘dying too early’ and ‘living too long’ as well as some living needs.
Meeting all these needs will be frustrated if our creditors attach our policy for the amounts we owe them.
Our creditors have the right to attach any of our movable or immovable property for their dues and life insurance policy and the benefits there in like sum assured, bonuses and other monetary benefits are also considered as property for this purpose. Our beneficiaries (who receive the money on death, such as Nominees or even Assignees under certain circumstances) will be totally helpless in such a situation and hence the purpose of taking a policy for specific and good causes will be sadly defeated. The life insurance companies have to comply with provisions law and will have to first satisfy the amounts demanded by the creditors and if there is balance, it will be settled in favour of our beneficiaries. When a policy is attached we cannot deal with it any way. The company will not permit any loan, surrender or transfer of beneficiary.
A person works hard and earns money; from that money he buys assets. A life insurance policy is also an asset. Over a period of time we convert these assets into cash and fulfil our various needs. Otherwise upon death it must create a good legacy.

What is a good legacy? In our absence our hard-earned lifelong created assets must go
1) To the right person
2) At the right time
3) For the right value
4) In the right form.

“To leave the heirs to defend their rights could be traumatic, both emotionally and financially.” –Gopinath Sir.

It is to be mentioned here that a husband can also name his wife and kids as ‘beneficial nominees’ in a life insurance policy. Once beneficial nominees are named no one else can challenge their right to the death benefits of the policy. However the nominees so named can be changed during the tenure of the policy. This means that under the influence of other family members the husband can change the beneficiaries of the policy at a later stage.

THE HISTORY OF MWP ACT
The Indian MWP Act is based on the MWP Act 1870 passed by British Parliament. This Act was passed by historically at a time when married women had very little or no right to hold property in their own name. This Act gave the right of holding a life insurance policy taken by a married
woman as ‘property’ in her own name. Life Insurance policies taken by her husband on his own life for the benefit ‘wife and the children’ and policies taken by the married woman on her life for the benefit of her ‘husband and the children’ were given the status of a trust property untouchable by the creditors.

In our country also the Married Women’s Property Act was passed in the year 1874 based on the British Act of 1870. This Act gave the right for the married woman to take a policy in her own name and hold the same as her exclusive property independent of the husband and also allowed a married man to take policy for the benefit of the wife and children and create a ‘trust’ free from his creditors.

The provisions of the Act were extended to the Hindu, Mohammedan, Sikh, and Jain by an amendment in 1923 and again by an amendment it was extended also to the Buddhists. With effect from 1 st March 1960, this Act is applicable to all married men in our country in all the States and Union Territories.

THE PROVISION OF MWP ACT 1874:
Two sections are relevant for life insurance in this Act and they are Section 5 and Section 6. Here I will discuss about Section 6 of the MWP act, which is a very special provision in law that will defend the rights of the inheritors and will not allow the creditors access that asset against their dues.

The Section 6, MWP Act 1874 –
“A policy of Life Insurance effected by any married man on his own life and expressed on the face of it to be for the benefit of his wife, or his wife and children, or any of them according to the interest so expressed, and shall not, so long as the any object of the trust remains, be subject to the control of the husband, or creditors, or form part of his estate.”

A policy of insurance: Meaning that no other type of asset is covered under this provision.

Married man on his own life: The policy of insurance should avail by a married man, and the risk cover should be on his own life. Meaning that policies on the life of children or others cannot be covered under this provision.

Beneficiaries can be his wife, wife and children or any of them: Meaning that he can wish to pass the benefit to specific people in this class. For example the beneficiary can be defined as wife and the first daughter or wife and second daughter. This provision is made to ensure that
the policy serves only to those beneficiaries and he has the right to exclude, if he so wants to, any person amongst his children from the benefiting from this policy.

Deemed to be trust: This means that all the protections normally available for a trust and the funds held by a trust will be available for policies effected under the act, but the formalities which have to observed in case of trust, like registration of the trust, audit of the accounts of the trust, etc., need not to be observed here. A simple person without any legal qualifications can also ensure the benefits are secured easily.

According to the interest expressed: This means that he can even prescribe ratios for sharing or even effect contingent conditions by which the benefits will flow to the beneficiaries.

Not be subject to the control of the husband or to his creditors or form a part of his estate:This is the very essence of this act. This helps husband to provide adequately for his family.
Businessmen who avail loans and facilities from banks and other institutions are undertaking a risk expecting growth in business. While doing so he pledges his assets to the bank to avail that facility. While he can certainly repay the loan in time and safeguard his assets, the issue become
critical if he happens to die before the obligation is cleared. The bank and creditors after auctioning the pledged assets can seek to attach his personal assets to recover the loan and the interests thereof. Whereas the policy effected under MWP Act can NOT be so attached. These policy monies will not form a part of his estate.

This Act is not just for businessmen, but for anyone who wants to protect their family and ensure that monies do not get into wrong hands even within the relatives, who may scheme against, which we have seen, happening in many instances. Since the policy benefits is not subject to control of the husband also, any pressure brought onto him, or even by coercion these monies cannot be taken away by wrong people.

Advantages of MWP Act Policies

• A married man makes a very safe provision for his wife and children beyond the control of his creditors.
• A creditor cannot attach the policy at any stage, either during the currency of the policy or when the claim becomes payable.
• Income Tax Authority also cannot issue notice under section 226(3) of Income Tax Act 1961 claiming the money.
• The legal cost and trouble of executing and registering a trust will be saved. A simple policy will do it without such cost or trouble in a very safe and foolproof method.
• The trust does not need any special care or maintenance or recurring expenses.
• As such policies become separate estates; succession planning through such policies is effective and cost-free for rich persons.

CONCLUSION

The significance and the utility of the provisions under the MWP Act policies are well not discussed by the insurance and financial professionals. We should present and unfold the specific need of this exceptional Act to every leader of families from different strata. The imperative need of every bread winner is that a certain amount must be made available to their wife and children free from court attachments, IT notices and their creditors. The families of such busy and workaholic businessmen, professionals need such policies.