Insurance & Estate Planning — Will, Trust & Succession
Where life insurance sits in estate planning: how property passes with and without a will, what a nomination under section 39 of the Insurance Act does and does not do, and how a policy under section 6 of the Married Women's Property Act, 1874 is held in trust.
What estate planning is for
Estate planning arranges for a person's wealth to pass to the intended people in an orderly way. India has no inheritance tax, so the questions are mainly about who receives what, and how smoothly.
Life insurance has a particular place here. A claim gives the family money quickly, while other assets can take much longer to transfer. Under IRDAI's Master Circular on Protection of Policyholders' Interests of 5 September 2024, a death claim is to be settled within 15 days of intimation, or 45 days where investigation is needed.
With a will and without one
A will sets out who is to receive the person's assets generally, which reduces disputes among heirs. Registering a will is optional.
Without a will, inheritance follows personal law. The Hindu Succession Act, 1956 applies to Hindus, Buddhists, Jains and Sikhs. The Indian Succession Act, 1925 applies to Christians, Parsis and Jews, and also governs the wills of non-Muslims. Muslims are governed by Muslim personal law.
Nomination under section 39
A nomination covers only the policy it is made under and tells the insurer whom to pay. It is not a substitute for a will, and a will does not speed up an insurance claim, because the insurer pays the nominee on its records.
Whether the nominee keeps the money depends on who the nominee is. Under section 39 of the Insurance Act, 1938, as amended with effect from 26 December 2014, a parent, spouse or child nominated by a person holding a policy on their own life is a beneficial nominee, entitled to the money. Any other nominee, such as a friend or a sibling, can give the insurer a valid discharge but receives the money on behalf of the legal heirs. Before the amendment the general position, stated by the Supreme Court in Sarbati Devi v. Usha Devi (1984), was that a nominee receives the policy money on behalf of the legal heirs.
A policy held in trust: the MWP Act
Section 6 of the Married Women's Property Act, 1874 covers a policy that a married man takes on his own life and that states on its face that it is for the benefit of his wife, his children, or both. Such a policy is a trust for them. It is not under the husband's control, is not available to his creditors and does not form part of his estate.
The protection has a limit written into the section: if the policy was taken and the premiums paid with intent to defraud creditors, the creditors may be paid out of the proceeds. If no special trustee is appointed, the sum is payable to the Official Trustee of the State. These trusts are governed by the MWP Act itself and the Insurance Act, not by the Hindu Succession Act, and section 39 nomination does not apply to such a policy.
Rules at a glance
Three policies, three outcomes
Illustration: Rohit, who is married with two children, holds three policies on his own life and dies without a will. On the first he had nominated his wife. She is a beneficial nominee under section 39 and is entitled to the money.
On the second he had nominated a close friend years before his marriage and never changed it. The insurer pays the friend, who can give a valid discharge, but the friend receives the money on behalf of Rohit's legal heirs, who take under the succession law that applies to them.
The third was taken under section 6 of the Married Women's Property Act for his wife and children. It is a trust for them from the start; it never formed part of Rohit's estate, and the money goes to the trustee for the beneficiaries.
Key points
- India has no inheritance tax; without a will, property passes under the personal law that applies to the person.
- A will deals with a person's assets generally; a nomination covers one policy and tells the insurer whom to pay.
- A parent, spouse or child nominated by a person holding a policy on their own life is a beneficial nominee; any other nominee receives for the legal heirs.
- A policy under section 6 of the Married Women's Property Act, 1874 is a trust for the wife, the children or both, and stays outside the husband's estate.
- The MWP Act's protection against creditors does not hold where the policy was taken with intent to defraud them.
Common misunderstandings
- A nominee is not always the owner of the money: only a parent, spouse or child nominated by the life assured is a beneficial nominee.
- A will does not make an insurance claim faster: the insurer pays the nominee on its records.
- A nomination is not a will: it covers only the policy it is made under.
- The MWP Act does not give protection in every case: where the policy was taken with intent to defraud creditors, they may be paid out of the proceeds.
- MWP Act trusts are not governed by the Hindu Succession Act: they arise under the MWP Act itself.
Questions people ask
Does a will have to be registered to be valid?
No. Registering a will is optional.
Which law applies to the will of a Hindu?
The Indian Succession Act, 1925 governs the wills of non-Muslims. The Hindu Succession Act, 1956 governs succession among Hindus, Buddhists, Jains and Sikhs where there is no will.
Who can use section 6 of the MWP Act?
A married man, for a policy on his own life expressed to be for the benefit of his wife, his children or both.
Is tax payable on what is inherited?
India has no inheritance tax. A death benefit under a life policy is also exempt from income tax, except under a keyman policy.
What this lesson relies on
- Insurance Act, 1938 — section 39 (nomination), as amended with effect from 26 December 2014
- Married Women's Property Act, 1874 — section 6
- Hindu Succession Act, 1956; Indian Succession Act, 1925
- Sarbati Devi v. Usha Devi (Supreme Court, 1984)
- IRDAI Master Circular on Protection of Policyholders' Interests (5 September 2024)
- Income-tax Act, 2025 — section 11 read with Schedule II
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.