The Married Women Property or MWP Act is enacted to protect the interests and properties of married women and children from relatives, husband, and creditors. According to this act, a woman will not have to part with any asset that belongs to her and is not liable to pay off the loan taken by her husband or his family. Her properties will be protected from all the court attachments or from any other legal proceedings going against her husband.
This act does not only applies to the assets created before marriage, gifts received on marriage from parents (stridhan) but also to the assets or investments acquired or gained after marriage from her own personal income due to employment, occupation or trade carried on by her and not by husband.
But Assets created by her husband in her favor will not be counted under the Married Women property act and thus are not protected from creditors and are subject to attachment by the court. Let’s understand this with an example:
Rajiv was into a trading business. Taking credit limits from banks and giving personal guarantee on various loans was the normal course in his business. After few years his business went into heavy losses and got wound up. Bank attaches all the properties (personal and Business), bank FDs, Investments, etc. to recover bank dues. His wife’s jewelry was also attached as those were bought from business income. Even the house where all were living was not spared and there was nothing left for the family.
Or look at it from another angle.
Rajiv was into a trading business. Taking credit limits from banks and giving a personal guarantee on various loans in the normal course in his business. Unfortunately, after a few years, he met with an accident and died. Now there was no one to run the business and it had to be closed down. ….same happened as above
Another story went like this…
Rajiv’s business was running well but his friend’s business where he had given his personal guarantee went bust. The guarantee document clearly stated that bank can attach the guarantor’s assets to recover the dues and so happened.
Was there any way with which the family’s finances and future could have been protected from the creditors? The answer is yes; here MWP Act has its role to play.
Section 6 of the Married women property act says that if a married man buys a life insurance policy in his own name for the benefit of his wife and children then this policy will immediately become an asset of the beneficiary (wife/children) and creditors cannot attach this policy. Not only creditors even husband cannot control this policy now except paying regular premiums.
Buying policy under MWP Act automatically creates a Trust, with Husband as settlor, wife, and children as beneficiary and if required, the husband can appoint a trustee to receive the money on behalf of beneficiaries.
So in all the above cases had Rajiv bought a life insurance policy in his own name than the proceeds from that policy could have taken care of family’s financial future.
What’s the Procedure to buy life insurance Policy under Married women property act?
You just have to fill up a form (MWP addendum) along with the policy proposal form while buying a policy for the first time. Do note that you cannot convert the existing policy into an MWP benefit policy; it can only be done at the time of buying the policy. In the MWP addendum form, you have to state the name of beneficiaries, their respective share of benefits, and the name of trustees with their signature on acceptance to act as trustee.
Who can buy Life Insurance Policy under Married Women Property act?
Any married man can take such policy on his own name i.e. the proposer and the life insured should the same person. Even divorced and widowers can take policy under this act for the benefit of their children.
Who can be beneficiaries under such policies?
- Wife alone
- Child/Children alone ( both natural and adopted)
- Wife and Children together or any of them
Who can be Trustee in these policies?
Trustee can be any third person, a family member whom you can trust with the handling and managing of policy proceeds for beneficiary benefit. There’s no compulsion in appointing of Trustee except where the beneficiary is a minor. You can also appoint beneficiaries who are major as sole trustee or one of the trustees.
Some important points to note in Policy under Married women property act
- Policy holder can change the name of trustee at any point of time.
- Even married women can buy life insurance policy under MWP act on her own name for the benefit of children. Husband cannot be part of beneficiaries.( section 5 of Married Women Property act)
- You can have this benefit even in online policies.
- Beneficiaries once declared in the policy cannot be changed at later stage.
- Policy bought under MWP act cannot be surrendered or be assigned for taking loan by proposer.
- In case beneficiary predeceases insured then the policy proceeds will be distributed to the legal heirs of the beneficiary.
- Married Women Property act is applicable to all married women of all religions.
- Any policy (ULIP/Endowment/Term) can be bought under MWPA.
The purpose of buying a life insurance policy is to cover the financial responsibilities in case of untimely demise. To make sure that policy proceeds should be received by your wife and children, with no claim from creditors or court attachments, then the married women Property act comes as a solution. It is a must to be considered by persons who are into business.