Last will and testament: what you need to know

In 2017, I had my first will professionally written. It felt surreal to be presented with the physical document, knowing that when it is finally opened and read, I would have crossed the rainbow bridge. However, upon revisiting the document some years later, I realized that some of the clauses were not suitable. This was due to my unfamiliarity with how things work, which caused me to give incomplete instructions.

Will system in Malaysia

Before delving into today’s topic, it’s important to explain the will system in Malaysia. The Distribution Act 1958 outlines how assets are to be distributed in the event of an individual’s passing if they don’t have a will. This act applies only to non-Muslims living in West Malaysia and Sarawak. Muslims, on the other hand, are subject to the Syariah Law when it comes to asset distribution.

It can take a long time to distribute someone’s estate if they haven’t left a will and an inventory of their assets and liabilities. Creating an inventory is crucial as it saves the executor from spending time searching for assets, such as cash held in Malaysian bank accounts.

When you create a will, it is important to ensure it is done correctly. To be legally valid, the will must be written down with at least two witnesses who are not beneficiaries. You also need to be 18 years of age or older and have a sound mind when creating the will.

A will remains valid until it is replaced or revoked by a new will. Additionally, if you get married, remarried, or convert to Islam, your will becomes invalid. It is recommended that you create a new will in case of a divorce. For more information on wills and inheritance, please refer to the links below.

When someone passes away, their estate must go through a legal process called probate before their assets can be distributed. The executor named in the will is responsible for applying to the High Court to obtain a grant of probate. This person can be an individual or a trustee services provider.

Once the grant of probate is obtained, the executor can administer the assets and distribute them according to the wishes outlined in the will. Before property ownership can be transferred to the beneficiaries, any liabilities must be settled. The assets are held by the executor in trust until the distribution is complete. It’s important to note that an executor must be at least 18 years old, and a beneficiary can also be the executor.

Without a will, assets are distributed according to the Distribution Act to parents, spouses, and children. For more information, please refer to the links provided below.

A non-person, such as a company or association, can be a beneficiary, and an executor, like a trustee services provider, can also be a non-person.

The estate (the deceased’s assets) must go through the probate process with or without a will. Without a will, they will remain with the Malaysian government until someone claims them. If no one does that, they will remain with the government.

Insurance

Remember to fill out the nomination forms to name your beneficiaries if you have purchased insurance. You can submit the form and have an insurance company personnel witness it. This will allow the insurance company to pay the beneficiaries directly without going through probate. Foregoing the nomination forms and naming the beneficiaries in the will is not recommended. To avoid potential disputes, do not have beneficiaries in the will that differ from the nomination forms. If you need to change the beneficiaries, please do so through the nomination forms.

A trustee service provider has advised that when insurance policies become part of your estate, they may be subject to probate, and creditors could potentially contest and claim the payout. This also applies to money held in an Employee Pension Fund. To ensure that your desired beneficiaries receive the funds, you should nominate them in the nomination form.

If you have assigned your insurance policy to a financial institution via a deed of assignment to cover a loan, the insurance payout would be to the financial institution. This means the policyholder cannot do a separate nomination form to grant the balance of the payout after settling the loan to the beneficiary. The financial institution would hold the balance it is assigned to — and go through probate for distribution following the Distribution Act if there is no will or as per wishes stated if there is a will. Please check this with your financial institution and insurance provider.

Joint bank accounts

Joint accounts can have both benefits and drawbacks. It’s essential to keep in mind that some banks, including private banking accounts, may have a “survivorship clause” when creating a joint account or loan. This clause means that if one of the joint account holders passes away, the other person will become the sole owner of the account and will have the right to withdraw all the funds from it.

A legal expert has advised that a will designating another beneficiary to receive the deceased’s share cannot override the bank’s survivorship clause. Therefore, it is recommended that you should obtain written confirmation from your bank regarding how your will shall be implemented in such a scenario. Some trustee service providers have received conflicting responses from banks about executing a will. Hence, it is essential to take this step.

In cases where a survivorship clause is absent, the joint account holder who survives can usually withdraw their share of the account balance, but only if they comply with the account agreement’s specific terms and conditions. On the other hand, the bank will hold the share of the account belonging to the deceased until a grant of probate is issued. To obtain further information, it is advisable to consult your bank and carefully review the account agreement.

If you have a joint account with someone else and the arrangement is “either to sign”, the other account holder is legally allowed to withdraw all the funds, including your share, before your death. However, if you do not want the other account holder to have your share of the funds, it is important that you make your intentions clear. Failing to do so could potentially leave your dependents in a vulnerable situation.

A standard clause in a will is usually included to grant the surviving joint holder the deceased’s share. However, if the joint account exists with people other than the dependants, the will should clearly specify that the deceased’s share will be passed on to their dependants and not the joint account holder.

To ensure that your dependents receive your money after your death, it is recommended that you refrain from opening joint accounts with survivorship clauses or “either to sign” agreements with anyone. This can help avoid disagreements and legal proceedings, especially for spouses and dependents.

Power of Attorney

Generally, a power of attorney (POA) does not supersede a will. These two documents are independent of one another. A POA ends upon the death of the person who grants it (donor), and the will takes over. However, if the POA granted is given for valuable consideration and stated as irrevocable, the donor cannot cancel it, and it continues to stay in power after the donor’s death (Section 6, Power of Attorney Act 1949).

Although the person given the POA (donee) cannot alter the will and does not become the owner of the donor’s properties, he/she can transfer ownership of the property or sell it if the POA grants him that scope. You may want to seek legal counsel if the donee can change the ownership of the assets specified in the will.

As the name implies, a POA gives the donee power to manage the donor’s assets. On behalf of the donor, the donee can make decisions on their properties. This power is normally given to trusted close family members when the donor is dying or becoming mentally incapacitated. The donee can have broad powers within the expressed scope in the legal document. For more information on power of attorney, please refer to the links below.

Minors

It’s essential to talk with your children about your will, especially if they are minors. They should be informed about who to contact and where the will is located. After consulting with a trustee service provider, I have some reservations about leaving children’s inheritance to family members or relatives. This is not due to lack of trust but because I feel that managing the inheritance could create tension between family members and relatives.

Additionally, children may feel uncomfortable speaking up to a family member if they disagree with how their inheritance is handled. Unfortunately, there have been cases where family members or relatives have attempted to destroy a will because they disagree with its terms.

Recommendations

If your situation is complicated, it’s advisable to seek advice from a legal professional. Once you have a clear understanding of the applicable legalities, it’s essential to be decisive about who will benefit from your estate in the following scenarios: if you pass away, if both you and your spouse pass away, or if you, your spouse, and children pass away. If you have children, it’s crucial to plan an immediate solution for them in case of your and your spouse’s passing. Ensure that they know what to do.

References:

(1) Power Of Attorney: What Is It, And What Do You Need To Know? (propertyguru.com.my)

(2) Wills and Inheritance in Malaysia – Malaysia – Angloinfo

(3) Why do I need a will? What happens if I die without a will? (mahwengkwai.com)