Malaysia – What To Do With A Deceased’s Estate Upon His/Her Death?

How does an executor or administrator obtain the power to deal with a deceased’s estate?

 

After a person passes, the first step is to find out whether the deceased left a will. Depending on the existence of a will and the size of the estate, there are several different ways to obtain power to deal with the estate of the deceased:

 

With will

 

1. When there is a valid will and an executor has been named in the will, the executor should apply for the Grant of Probate of the will (section 3 of the Probate and Administration Act 1959 (“PAA 1959”)).

2. If there is a valid will, but either the executor named in the will had predeceased the testator or no executor had been appointed in the will, the person intending to be the administrator may apply for grant of Letters of Administration with the will annexed at a High Court (section 16 of the PAA 1959).The Court grants Letters of Administration to such person as the Court deems fit to administer, in the following order:a universal or residuary legatee;

1. a personal representative of a deceased universal or residuary legatee;

2. such person or persons, being beneficiaries under the will, as would have been entitled

   to a grant of Letters of Administration if the deceased had died intestate;

3. a legatee having a beneficial interest; and

4. a creditor of the deceased.

 

Without will

 

iv. If a person dies intestate, the person intending to be the administrator may apply for grant of Letters of Administration (section 30 of the PAA 1959). Depending on the size of the estate, there are different ways to obtain the Letters of Administration:

 

1. If the gross estate consists of wholly or partly immovable property, for example, land, a house, which exceeds RM2 million, the person intending to be the administrator will have to obtain Letters of Administration at the High Court (section 30, PAA 1959). The Court shall grant administration to one or more of the persons interested in the residuary estate of the deceased, unless by reason of the insolvency of the estate or other special circumstances the Court thinks it expedient to grant administration to some other person (s. 30, PAA 1959);

2. If the estate is a small estate, the person interested in the estate shall go to the Estate Distribution Unit of the Department of the Director-General of Lands and Mines (“JKPTG”) or the Land Office to get Letters of Administration (section 4, Small Estates (Distribution) Act 1955 (“SEDA 1955”)). The Letters of Administration will be in the form of a Distribution Order.

 

small estate refers to the estate of a deceased person consisting (section 3(2), SEDA 1955): A. wholly or partly of immovable property; and
B. not exceeding RM2,000,000 in total value at the time of application for summary administration; or

 

v. If the gross value of the estate is for only movable property and is less than RM600,000, and no person is entitled to apply for Grant of Probate or Letters of Administration, one may apply for summary administration via Amanah Raya Berhad (section 17, Public Trust Corporation Act 1995). Letters of Administration in the form of a Declaration or Order will be issued.

 

What is the next step after the Court has granted the Probate or Letters of Administration?

 

After the Court has granted the Probate or Letters of Administration, the personal representative (that is, the executor or the administrator) will have to do the following:

 

1. collect all the deceased’s assets;

2. pay off the deceased’s debts and liabilities (if any); and

3. distribute the estate in accordance with the deceased’s will if there is one, otherwise to distribute the estate in accordance with the Distribution Act 1958.

 

How does the personal representative transfer the immovable property from the estate of the deceased to the beneficiary or a third-party purchaser?

 

The first step is for the personal representative to register the vesting of the property forming part of the estate of the deceased to himself as representative at the land office (section 346, National Land Code 1965). The land office will endorse on the respective title deed that the property is vested in the personal representative “as representative”.

 

The second step depends on whether the deceased died leaving a will or intestate. If there is a valid will, the personal representative can transfer the property to the beneficiaries through presentation of the memorandum of transfer at the land office.

 

By contrast, if the deceased has died intestate, the personal representative will need to obtain the requisite order under section 60 of the PAA 1959 from the High Court sanctioning the transfer before the presentation of the transfer can take place at the land office.

 

If, instead of being transferred to a beneficiary, the property is to be sold to a third party purchaser, an order of the High Court under section 60 of the PAA 1959 sanctioning the sale has to be obtained before the presentation of the transfer can take place at the land office.

 

How much is the stamp duty for the transfer of the property from the estate of the deceased to the beneficiary and the third-party purchaser?

 

The stamp duty for the transfer of the property to the beneficiary, regardless of whether the deceased has left a will, is RM10 (Item 32(i), First Schedule, Stamp Act 1949).

 

By contrast, the stamp duty for the transfer of the property to the third party purchaser is the full ad valorem stamp duty ad valorem [Item 32(a), First Schedule, SA 1949 (as amended by the Finance Act 2018 (“FA 2018”) which came into effect on 1 January 2019)].

 

How much is the real property gains tax (“RPGT”) for the transfer of the property from the estate of the deceased to the beneficiary and the third-party purchaser?

 

When a property forming part of the estate is vested in the personal representative, there is no RPGT payable as the disposal price of the property is deemed equal to acquisition price of the property (paragraph 3(1)(a), Schedule 2, Real Property Gains Tax Act 1976 (“RPGT Act 1976”)).

 

When the personal representative transfers the property to a beneficiary, there is also no RPGT payable too (paragraph 3(1)(a), Schedule 2, RPGT Act 1976). Nevertheless, if the beneficiary subsequently disposes of the property, the beneficiary will be deemed to have acquired the property on the date of transfer of ownership of the property to the beneficiary and the acquisition price of the property will accordingly be the market value of the property on such date (paragraphs 15(2), 15A(c) and 19(3A), Schedule 2, RPGT Act 1976).

 

If the personal representative transfers the property to a third-party purchaser, the personal representative will need to pay RPGT in accordance with the rate of tax specified in Schedule 5 of the RPGT Act 1976 (as amended by the FA 2018 which came into effect from 1 January 2019). The personal representative will be deemed to have acquired the property on the date of death of the deceased and the acquisition price of the property will accordingly be the market value of the property on such date (paragraphs 15B(1) and 19(3), Schedule 2, RPGT Act 1976).