Estate planning in India with a life policy: nominees, wills, trusts and what reaches the next generation

By Eldar Edmond Grady, CEO, PPLI.com. Research checked 20 October 2026.हिन्दी में पढ़ें

Indian law as at 20 October 2026. Succession in India depends on personal law (Hindu, Muslim, Christian, Parsi) and on where the assets are; this page describes the general position for a policy and is not a substitute for a will drafted by a lawyer.

PPLI.com is a research publisher. It is not a law firm, a tax adviser or an insurance intermediary, it is not registered with IRDAI or SEBI, and it does not solicit or arrange insurance in India. Nothing on this page is advice on your own estate.

India taxes the heirs’ sale, not the inheritance

Estate duty was abolished for deaths on or after 16 March 1985, and India has no inheritance tax or gift tax on transfers at death; property received by will or inheritance is outside section 56(2)(x). Every Budget season brings speculation that an inheritance tax will return, and so far none has; the history and the current rules are on inheritance tax in India. What the heirs inherit is the deceased’s cost: under section 49(1) the cost of acquisition of inherited shares, units or property is the cost to the previous owner, and under section 2(42A) the holding period includes the previous owner’s. So the accumulated gain on a Singapore portfolio is taxed in the children’s hands when they sell, at 12.5% on long-term foreign equity or at slab rate for the rest.

A life policy is different at that one point. The sum received on death is exempt under the eighth proviso to ULIP) or Rs 5 lakh (other policies) of annual premium; death benefits stay exempt.">section 10(10D) whatever the premium, so the policy’s whole value reaches the nominee without the income tax that a surrender in life, or a later sale by the heirs, would have cost. The figures are on how India taxes a foreign life insurance policy. Everything else on this page is about process, which in India is where the time and the disputes are.

What a nominee is under Indian law, and what a nomination form does not settle

Section 39 of the Insurance Act 1938 lets a policyholder nominate the person to whom the money is paid on death. Until 2015 a nominee was only a collector: the insurer paid the nominee, who then held the money for the legal heirs under the will or the personal law, and families fought over it. The Insurance Laws (Amendment) Act 2015 added section 39(7): where the nominee is the policyholder’s parent, spouse, child or any of them, the nominee is beneficially entitled to the amount paid, unless the policy says otherwise. A beneficial nominee keeps the money; a friend or a sibling named as nominee still collects for the heirs. A will can still direct an insurer’s payout where the nominee is not a beneficial nominee, and a will made after the nomination and dealing expressly with the policy raises questions a lawyer should answer before the dispute, not after.

Section 39 belongs to an Indian statute and applies to policies issued by insurers registered in India. A policy from a Singapore, Luxembourg or Bermuda insurer follows its own governing law and the insurer’s own forms: a revocable or irrevocable beneficiary designation, or an assignment to a trust, under that law. Singapore’s statutory nominations under sections 131 to 133 of its Insurance Act 1966, for example, are available only on a policy governed by Singapore law and issued by a licensed insurer; our Singapore edition explains the difference between a trust nomination and a revocable one. The practical rule for an Indian family with a foreign policy is to read the designation clause in the contract, name the beneficiary the way that contract requires, and keep a copy with the will.

The Married Women’s Property Act route

Section 6 of the Married Women’s Property Act 1874 lets a married man take a policy on his own life for the benefit of his wife, or his wife and children, as a trust: the policy is not part of his estate, is outside the reach of his creditors, and is paid to the trustees for the beneficiaries. It is widely used by business owners in India. It is an Indian mechanism for Indian policies; a foreign policy can achieve a similar separation by being owned by a trust from the outset, which is the next section.

Owner, trust or company: who holds the policy

The simplest arrangement is a policy owned by the person whose life is insured, with a beneficial nominee. It works for a family whose members and assets are in one country and whose succession is uncontested. For a family spread across Mumbai, Dubai and London, with a founder who wants control over when and how the children receive the money, the policy is often owned by a trust. A trust under the Indian Trusts Act 1882 is taxed under section 164 at the maximum marginal rate where the beneficiaries’ shares are indeterminate; a trust settled abroad while the settlor was non-resident has its own disclosure under surrender value.">Schedule FA once the settlor or a beneficiary is ordinarily resident in India. In either case the trust deed, not the nomination form, decides who gets what and when, and the trustee must be someone who will still be there in thirty years.

The FEMA point sits underneath all of this. A resident of India may hold a foreign policy taken while non-resident (regulation 4(ii)); a trust settled by an NRI before return, holding the policy, has to be set up while the settlor is still non-resident. A resident cannot cure the exchange-control problem by putting a policy in a relative’s name or in a trust formed after the return. The rules are on FEMA, LRS and foreign life insurance, and the timing on returning to India: the RNOR window.

What the family needs when the claim is made

An Indian insurer settles a death claim on the claim form, the death certificate, the original policy, the nominee’s identity and bank details, and, where there is no beneficial nominee, a succession certificate or probate. A foreign insurer asks for the same things in its own form, and usually for the death certificate apostilled under the Hague Convention, which India joined in 2005, and for its own KYC of the beneficiary. Where there is no valid beneficiary designation, the insurer will want proof of title under the governing law of the policy, which can mean a grant obtained abroad and resealed, or a fresh grant there. That is months, and lawyers in two countries.

Two exchange-control steps follow. If the premiums were remitted from India, regulation 4 requires the policyholder to bring the claim proceeds back to India within seven days of receipt. If the beneficiary is an NRI, the proceeds can be received abroad or in an NRE account; if the beneficiary is resident, they come to an Indian account at the bank’s rate on the day. In all cases the policy stays in the deceased’s last Schedule FA, and the beneficiary who is ordinarily resident reports the receipt in theirs.

Where personal law still speaks

For a Hindu, Sikh, Jain or Buddhist, intestate succession follows the Hindu Succession Act 1956, and the Class I heirs (spouse, children, mother, and the children of a deceased child) take equally; a will under the Indian Succession Act 1925 can displace that for self-acquired property, and a beneficial nominee under section 39(7) keeps the insurance money. Coparcenary property of a Hindu undivided family is a separate question, and a policy bought with HUF funds belongs to the HUF, not to the karta. For a Muslim, the personal law limits a bequest to one-third of the estate without the heirs’ consent, and whether a beneficial nomination of a policy escapes that limit has been litigated; a family in that position needs a lawyer who has read the cases, not this page. For a Christian or a Parsi, the Indian Succession Act applies to intestacy.

A foreign policy adds a layer: the governing law of the contract decides whether the beneficiary designation is effective, and the Indian personal law decides what happens to money that reaches the estate. The two are reconciled by naming a beneficiary who is also the intended heir, or by using a trust whose deed matches the will. Where they are not reconciled, the money goes where the paperwork, not the intention, points.

Eight decisions to take before the policy is bought

• Who owns the policy: the life insured, a spouse, a trust settled while non-resident, or a company. The answer decides FEMA, section 164 and the claim process.
• Who the beneficiary is, under the policy’s own law, and whether that person is also an heir under the will and the personal law.
• Whether the beneficiary is a beneficial nominee (spouse, child, parent) or a collector for the heirs, if the policy is an Indian one.
• Where the beneficiary lives, and in which account and currency the proceeds will be received; an NRI beneficiary and a resident beneficiary are different cases under FEMA.
• Whether the will mentions the policy, and whether it was made before or after the designation.
• Who the trustee is, if there is a trust, and who replaces them.
• Which documents the insurer will ask for on a claim, and where the originals are kept; an apostilled death certificate takes weeks.
• Whether premiums were ever paid from India, which triggers the seven-day repatriation rule on the claim.

Decide these before the proposal, because changing the owner of a policy after issue can be a transfer with tax and exchange-control consequences of its own. The checklist for a foreign proposal more generally is on how a policy is built.

Sources and authorities

• Insurance Act 1938, section 39, as amended by the Insurance Laws (Amendment) Act 2015, in particular section 39(7); section 38 (assignment).
• Married Women’s Property Act 1874, section 6. Indian Trusts Act 1882. Hindu Succession Act 1956, section 8 and the Schedule (Class I heirs). Indian Succession Act 1925.
• Income-tax Act 1961, section 10(10D), eighth proviso; sections 2(42A), 49(1), 56(2)(x), 164; Estate Duty Act 1953 as discontinued for deaths from 16 March 1985.
• FEMA 12(R)/2015-RB, regulation 4 and its proviso (seven-day repatriation), regulation 4(ii). Hague Apostille Convention, in force for India since 14 July 2005.
• Singapore Insurance Act 1966, sections 131 to 133 (statutory nominations), as explained in our Singapore edition.