How to save your wife, kids from creditors

How sure are you that your wife and children's future is secured after your death? This question must be haunting all those who are the only source of income for their family. We work hard, save our income, make investments in various instruments. But incase you have a long list of creditors waiting at your doorstep when you die, these investments will be distributed amongst them with a court settlement. What about your wife and your child then? Don't you wish to have an investment, which is free from court attachments, tax attachments and also creditors?

Your wish may come true with the help of Married Women's Property Act(MWP), 1874. The importance of the act is its simple method of creating a benefit for wife and children. Under MWP Act, a trust is created under which the money is absolutely safe. It is free from creditors, court attachments and also tax attachments.

Insurance under Married Women's Property Act

Every married man (which includes a widower) can take out an insurance policy under the provision of the Act (Section 5) for the benefit of wife and/or children. However, Amarjit Kaur, Advocate, High Court informs, "If the insurance is taken under MWP Act, the policyholder (in this case, a married man) will lose all control over the policy except payment premiums from day one and policy will become a trust (wife) property".

The beneficiaries will only be wife and children. For example, in case the policyholder i.e. the husband was in debt before he died, his creditors will get nothing out of this policy, not even with the help of the court. Therefore, the policy becomes free from the vice of policyholder's creditors, court/attachments or even tax attachments etc. "MWP act is applicable for all married women of all the religions. The policy will take care of only the wife and the children completely, " explains Amarjit Kaur.

Trust/ trustee

Policyholder can appoint trust / trustees. It could be his wife or his adult child. The policy becomes the trust property. In the absence of this, official trustee of the state will be the trustee. The policyholder will have no stake in the policy.

The moment the policy is issued it shall insure as a trust, without the requirement of a stamped deed under Indian Trusts Act. There is no need for creating a separate Trust.

Beneficiaries

When a policyholder chooses the beneficiaries as a class, the wife and children surviving with the policyholder till the date of maturity shall be the beneficiaries. Further no changes whatsoever can be effected without the consent of beneficiaries. Only wife and children can be beneficiaries. They can act as beneficiaries either alone or as follows:

Wife alone
Children alone
Wife and children alone
Existing wife by name
Existing children by names
Existing wife and children by names

Disadvantages

According to Amarjit Kaur, there are no disadvantages as such in MWP Act. But she says that the act is just uncommon. "Not many people know about it. Secondly, men who like to have control over the house or who like to take all financial decisions would never opt for this act."

Ideal for:

• People running business on borrowed capital.
• People who have not made sufficient provision for wife and children financially.
• People who consider that it is imperative to make certain amount available for wife and children free from creditors and court attachments.

For more on marriage and money, log on to www.moneycontrol.com