When death occurs, the first thing we have to ascertain is whether the deceased has left a will or not. This is important to determine the appropriate letters of representation to petition.
Where there is a will, a petition for probate is made to the court by the personal representative (also known as the executor) appointed in the will. In the absence of a will, a petition for letters of administration can be made by the beneficiary (ies) of the estate as set out under Distribution Act 1958 (Amended Act 1997) for West Malaysia and Sarawak or Intestate Succession Ordinance (1960) for Sabah.
That is why, it is very important to keep your will in safe custody and inform your personal representatives of its whereabouts. Although the deceased may have written a will but failure to locate the will would deemed the deceased intestate and the distribution of the estate will be as set out under the distribution laws in Malaysia.
The first step to be taken by the family members of the deceased is to obtain the death certificate. It is important to make enough copies of the death certificate as every application to the relevant authorities and financial institutions would require a copy of the death certificate. The family members should then try to locate the original will and prepare a few certified true copies in the event the original will is misplaced or lost.
The next thing to do is to contact and inform the relevant agencies, financial institutions and other relevant parties of the demise of the decedent. This is to allow non-probate estate such as EPF monies, proceeds from life insurance policies and/or any survival benefits from the deceased’s employer, to be transferred to the nominated beneficiaries without having to wait for the probate process which may take a while.
Finally, the family members must try to gather all the necessary information and documentation of the decedent’s assets and liabilities.
ADMINISTRATION OF TESTATE ESTATE
Step 1 - Filing Petition for Grant of Probate
Probate is simply proof or confirmation that whoever has been appointed to administer the estate of the deceased has the power to do so. It is a legal process to prove that the will is valid, it is the will of the decedent and it is the decedent’s last will.
A petition can be made to the Registrar of the High Court by filing the following documents:-
· The last will of the deceased and any codicils or annexed documents
· The death certificate of the deceased
· Administration oath by the executor
· Affidavit of one of the witnesses of the will
It is common to hire a lawyer to attend to the probate process as the paper work and filing procedures can be very complex.
The Probate and Administration Act 1959 and Rules of the High Court 1980 confer the powers on the Registrar to appoint the personal representative. The Grant of Probate would be issued once the Registrar is satisfied with the validity of the will.
Step 2 – Notice to Creditors
The first thing that the personal representative is required to do is to inform the decedent’s creditors so that they can present their claims to the court for settlement. This is normally done through advertisements or notices placed in the newspapers or in the government gazettes. Where possible, this can also be done through direct mail.
Step 3 – Inventorying and Appraising Assets
During the probate process, all the assets are frozen to allow an accurate inventory and appraisal to be made. The personal representative has an important duty to call in all the assets and ascertain the value.
This process becomes difficult when the deceased do not keep proper records detailing all the assets and also becomes complicated when the estate is a large one consisting of assets all over the world.
As such, it is always useful and important that we should always keep an updated inventory of all our assets and liabilities and ensure that all the relevant documents are filed properly.
Step 4 – Payment of Debts, Liabilities and Taxes
Debts, liabilities and taxes have to be settled first before the assets can be distributed to the beneficiaries. If the debts, liabilities and taxes are more than the assets available, the estate becomes a bankrupt estate and the beneficiaries will not receive anything. The rules governing insolvent estates are provided for under Section 69, Part I of the Probate and Administration Act 1959.
The debts are ranked and are payable according to priorities:-
1. Funeral expenses
2. Income taxes and estate duties (where applicable)
3. Testamentary expenses (cost of administering the deceased estate)
4. Creditors of the estate
For solvent estates, where there is no directive by the testator to pay off debts using specific funds or assets, the order by which assets should be applied to payment of debts is stipulated under Section 69, Part II of the Probate and Administration Act 1959.
It is, therefore, good advice that proper provisions are made to ensure that all our debts and liabilities (whether personal or business) are taken care of in the event of our death so that our beneficiaries will inherit our estate free of debts and liabilities. Provisions such as mortgage insurance and proceeds from life insurance policies can help ensure that the settlement of any outstanding housing mortgages, personal debts such as car or credit card loans and any liabilities from outstanding business loans or overdrafts.
Step 5 – Distribution of Assets
After all the debts and liabilities have been settled, the remainder of the estate can then be distributed to the rightful beneficiaries as laid down in the will. This is where the clear identification of each beneficiary together with the gift they are to receive is essential, as it prevents any disputes or arguments. Once this is completed, the administration of the estate will cease.
However, if there is a minor beneficiary or where a life interest exists or where a testamentary trust is created, the personal representative will transfer the assets concerned to the appointed trustee to administer these assets until the trust ends. The trustee could be the same person acting as the personal representative or it could be another person. It is common for the same person to act as both the executor and trustee for an estate.
Step 6 – Closing
It is the duty of the personal representative to keep proper accounts for all receipts and disbursements for the whole process of administering the estate. At any time, the court or any beneficiary could demand for a statement of account from the personal representative.
It is also the duty of the personal representative to determine the various tax returns, which may be required by law, to be filed for the estate. This could possibly include the income tax returns on the personal income of the decedent, which may have not been filed, and also the income tax returns for the estate. Submission of these tax returns are required by law and may not necessarily mean that there will be any tax to pay.
Upon final distribution of the estate and filing of the final account and all receipts of the beneficiaries, the court will issue an order discharging the personal representative.
Upon receipt of the Order of Discharge, the administration of the estate is completed.
The petition for Grant of Probate to the Registrar of the High Court described above would normally take between 12 to 18 months. The legal fees charged by legal firms to apply for the Grant of Probate could range between RM 2,000 to RM 5,000 or even more depending on the extend of the work involved.
It would then take another 6 to 12 months to complete the administration of the estate. This is if there is a will done up properly and all documentation is in order.
As you can see, the probate process is a lengthy and complicated one. Can you imagine if there is no will or proper documentation of a person’s assets and liabilities?
In our next article, we will look at the administration of intestate or partial intestate estate.
Source: Robinson Pan is the vice president and executive director of Integrated Will Services (M) Sdn. Bhd., a leading will writing company in Malaysia that works with an established legal firm to provide will writing services to the public. This article was first published in Personal Money.
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