What’s the difference between revocable and irrevocable beneficiary?

Gusto ko pong malaman, ano po ba kinaibahan ng revocable at irrevocable beneficiary?

Ano po ang advantage kapag pinili ko ang isa over the other? Meron po bang consequences?

15 thoughts on “What’s the difference between revocable and irrevocable beneficiary?”

  1. Thank you for the question.

    Everytime na papipiliin tayo ng beneficiary sa isang insurance application, pamimiliin tayo kung revocable ba ito or irrevocable. What I mean about beneficiary ay sila yung mga tao na makakatanggap ng pero kung sakali nawala tayo ng maaga.

    Kapag ginawa natin revocable ang isang beneficiary, at any time we can make changes in our policy, without the consent of the revocable beneficiary. This means that we will retain our flexibility in making any changes, making withdrawals, or even changing beneficiaries without informing other people, except of course your life insurance company.

    The downside is that when death claims are to be claimed, it will be subject to estate tax.

    Now, for the irrevocable beneficiary, you will be losing all the flexibility of the revocable beneficiary. In any changes you’ll be making in your policy, either withdrawal, change of beneficiaries, even corrections, you’ll always be needing the consent of the irrevocable beneficiary. It’s like your policy becomes an “AND” joint account.

    The upside is the death claims are no longer subject to tax.

    Here’s what’s interesting.

    The Insurance Code says that if a revocable beneficiary hasn’t been changed during the lifetime of the policy, it is deemed irrevocable.

    However, the tax code says that in order for a life insurance proceed to be tax exempt, the beneficiary should be defined as irrevocable EXPLICITLY.

    Which will prevail? I believe the tax code has the higher authority. But that’s my opinion, let’s just see the progress of this conflict.

    1. thanks for the info…ganun pala yun dapat irrevocable yung beneficiary para hindi siya kasali sa estate tax, karamihan kasi nagpo-post about insurance they always tell it’s tax free.. not mentioning that condition…
      paano po kung irrevocable beneficiary ang unang nawala, pwede bang mag-assign ulet ng panibagong beneficiary or will it be part ng estate tax ng beneficiary since yung plan is irrevocable?

      1. Hi Lizbeth,

        Kung ang beneficiary ang unang nawala, pwede naman mag-assign nlng ng panibago.

        Kung hindi napalitan ng beneficiary pero meron naman other primary beneficiaries, paghahatian nila kung magkano man ung insurance proceeds.

        Example, si insured A ay meron beneficiary, si B at si C. Kung namatay si beneficiary B, kay C lahat mapupunta ang lahat ng insurance proceeds. Kung pinalitan si B with beneficiary D, paghahatian ni C at D ung insurance proceeds.

        Kung namatay lahat ng beneficiaries at hindi napalitan ni Insured A bago siya mamatay. Mapupunta sa estate nya yung insurance proceeds, subject to estate tax.

        1. mapuupunta sa state, meaning, walang beneficiary na makakatangap ng insurance na kahit na sino na pinakamalapit o malayong kamaganakan?

          1. Ang makakatanggap lang po ng insurance proceed ay ang mga tao na dineclare na beneficiary dun sa policy contract. Ibig po sabihin, kahit anak pero hindi nakadeclare as beneficiary sa insurance contract, it can’t be claimed by anybody in the family.

            What will happen is didiretso sa estate ng insured yung insurance proceeds, kasama ng mga real estate properties, investments, cash in bank, etc… and will be frozen (inaccessible) until the estate tax due is paid.

  2. Hi, very good info here. Just to share, please see Republic Act 10607 dated Aug 15, 2013.

    “SEC. 11. The insured shall have the right to change the beneficiary he designated in the policy, unless he has expressly waived this right in said policy. Notwithstanding the foregoing, in the event the insured does not change the beneficiary during his lifetime, the designation shall be deemed irrevocable.”

    What if there are multiple beneficiaries and the owner changes the portions per beneficiary, would the above mentioned rule still take effect? Ex. Beneficiaries Spouse and child have equal share (50% each) and the owner/insured decides to increase to 75% to child and 25% to spouse, would the ruling above still hold?

    I appreciate the info very much..

    Thanks.

    1. Hi Nony,

      Very interesting question. You’re pertaining to the changes in the allocation of the beneficiaries but not changing the beneficiaries themselves.

      I don’t have the answer yet.

      However, unless the tax code will align to this provision of the insurance code, this provision would still be of no use.

      The tax code states that insurance proceeds are included in the computation of Gross Estates unless it is EXPRESSLY stipulated the the designation of the beneficiary is irrevocable.

      “(E) Proceeds of Life Insurance. – To the extent of the amount receivable by the estate of the deceased, his executor, or administrator, as insurance under policies taken out by the decedent upon his own life, irrespective of whether or not the insured retained the power of revocation, or to the extent of the amount receivable by any beneficiary designated in the policy of insurance, except when it is expressly stipulated that the designation of the beneficiary is irrevocable.”

      That puts us in a wait and see situation.

  3. Hi Sir,
    What is the Best way i can do if ang irrevocable beneficiary ayaw mag consent na e widraw or e cancel ko ang insurance policy ko..Kasi po Divorced na Kami dito sa Canada and right Now Naka process ang Marriage Annulement namin sa Pinas .merun pa ba solution sa case ko?

    1. Hi Daryl,

      How much are you expecting to receive from your policy should you wish to withdraw or cancel it?

      There’s a provision in the Family Code kung saan pwede irevoke yung irrevocable designation, the question will be is if worth it ba to undergo that legal proceedings..

  4. Nice topic. Sir Nick May question din ako may instance ba na hindi naisasama sa gross estate ang isurance proceeds? Sa declaration ng estate, maari din kayang hindi makita o malaman ng BIR ang tungkol sa Insurance Plan/s ng isang insured(deceased)? Thank you.

  5. Hi po,
    Ask ko lng po pano po kung 2 lng kmi ng kapatid ko ang beneficiary, me being the eldest and my sibling is mentally incapacitated (autistic). Ulilang lubos na kming 2, nanay namin ung insured na kamamatay lng, do i still need to file for court order/guardianship ng kapatid ko pra makuha nya ung part nya sa claim?
    Hope to get a response, thanks in advance..

    1. Hi Karen,

      I’m sorry for your loss.

      It would be best to contact the life insurance company first so you would know their take. You can do this by filing your claim as soon as possible. You may contact your agent.

      If you no longer have an active agent, you may send us a message through our contact forms. I can check on how my team can give you a hand.

      http://lifeinsurancehub.ph/contact-us/

      I’ve looked up your case with the Insurance Code. There might be a chance that you’ll need to undergo some legal process to establish your guardianship to your sibling. But then again, it’s best to first check with the life insurance company before seeking legal advice.

      I hope this helps.

      Nick

  6. Hi Sir,

    I would like to know if my husband and I are sole irrevocable beneficiaries of each other’s life insurance policy and we both pass away simultaneously, our insurance proceeds will go to our estate, correct? Will it be subject to estate tax for our heirs?

    Thanks

Comments are closed.