Section 11 of the Married Women’s Property Act (Chapter 281) is one of the most practically valuable provisions in Papua New Guinean family property law.
Subject to subsection (2), a policy of assurance effected by a spouse on his or her own life and expressed to be for the benefit of —
(a) his or her spouse; and (b) his or her children, or any of them,
creates a trust in favour of the persons named in the policy; and so long as an object of the trust remains unperformed, the moneys payable under the policy —
(c) do not form part of the estate of the insured; and
(d) are not subject to his or her debts.
Why a trust matters so much
| Expressed for spouse and children | Payable to the estate | |
|---|---|---|
| Part of the estate? | No — s 11(1)(c) | Yes |
| Available to creditors? | No — s 11(1)(d) | Yes — debts are paid first |
| Who receives it | The named beneficiaries, as of right | Whatever remains after debts, under the will or on intestacy |
| Delay | Payable on the trustee’s receipt — s 11(6) | Awaits probate or administration |
On death, an estate’s debts are discharged before anything reaches the family. A person who dies owing money may leave a family with nothing.
Section 11 is the answer. Because the policy moneys are held on trust for the named beneficiaries, they never form part of the estate at all — and are therefore not subject to the deceased’s debts.
The protection lasts “so long as an object of the trust remains unperformed”. Once the beneficiaries have been paid and the trust exhausted, there is nothing left for the section to protect.
Effected by a spouse on his or her own life. A policy taken out by a wife on her husband’s life — permitted by section 10(a)(ii) — is not within section 11.
Expressed to be for the benefit of the spouse and children, or any of them. The expression must be in the policy. A policy silent as to beneficiaries is payable to the estate.
In favour of the persons named. The trust is for those the policy names, so the naming should be accurate and kept up to date.
Note that section 11 applies to a spouse — husband or wife alike — even though the Act is otherwise concerned with married women.
Section 11(2) — the limit
If it is proved that the policy was effected and the premiums were paid with intent to defraud the creditors of the insured, they are entitled to receive out of the moneys payable under the policy a sum equal to the premiums paid, with simple interest on that sum at the rate of 6% per annum.
Creditors do not take the whole policy. They recover only the premiums paid, plus 6% simple interest — that is, the value actually diverted from the estate, rather than the much larger sum the policy produces on death.
And the burden is on the creditors: it must be proved that the policy was effected and the premiums paid with intent to defraud. Ordinary prudent provision for a family is not caught.
Compare section 9(2), which denies validity as against a husband’s creditors to a gift that remains in his order and disposition, or to a deposit in his wife’s name in fraud of his creditors — and section 93 of the Matrimonial Causes Act (Chapter 282), on transactions intended to defeat claims.
Sections 11(3) to (6) — administering the trust
(3) The insured may, by the policy or by a memorandum under his or her hand — (a) appoint a trustee or trustees, and from time to time appoint new ones; (b) make provision for appointing new trustees; and (c) make provision for the investment of the moneys.
(4) In default of appointment, the policy vests, immediately on being effected, in the insured and his or her legal personal representatives, in trust for the purposes of the trust.
(5) If at the death of the insured, or afterwards, there is no trustee or it is expedient to appoint a new trustee, one may be appointed by the National Court.
(6) The receipt of a trustee — or, in default of appointment or of notice of appointment to the insurance office, of the legal personal representative of the insured — is a sufficient discharge to the office for the sum secured, or the value of the policy, in whole or in part.
Appoint a trustee in the policy or by memorandum. Subsection (4) supplies a default — the insured and their legal personal representatives — but that means the money passes through the hands of whoever administers the estate, which is precisely the delay section 11 exists to avoid.
Name the beneficiaries clearly, and review them. The trust is in favour of the persons named in the policy. A policy naming a former spouse continues to name them.
Notify the insurance office of any trustee appointment. Subsection (6) makes the legal personal representative’s receipt a good discharge where the office has had no notice of an appointment.
Where there is no trustee, apply to the National Court under subsection (5).
Policy moneys received by a married woman are her own property under section 5(1)(b) — property acquired by or devolving on her belongs to her as if she were not married — and she has, under section 12, the same civil remedies for its protection against all persons, including her husband, as if she were unmarried.
Sources
- Married Women’s Property Act (Chapter 281) — ss 1, 5, 9–12
- Matrimonial Causes Act (Chapter 282) — s 93
Before relying on anything here, read the current text of the Marriage Act (Chapter 280) and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.