Let’s say, we have a man who has RM 2 million in assets, comprising his houses, his cars, his bank and investment accounts in Malaysia. If he passes on intestate (without a will), these assets would be frozen and require the following steps to retrieve and be distributed to his beneficiaries:
Step 1: Elect an Administrator
First, his legal beneficiaries would include any of the surviving:
Among them, they need to appoint a representative “the administrator” to kick start the administration process of his RM 2 million estate.
Step 2: Find 2 Sureties
The administrator will proceed to find two sureties which act as “guarantors” to this administration process. The sureties are liable for any losses that arise from the administrator’s duty negligence in administering his estate. Therefore, to be a surety, he or she must possess assets that are worth at least RM 2 million.
Step 3: Obtain the Letter of Administration (LOA)
Next, the administrator shall apply for the LOA from the High Court. Once it has been received, the administrator can proceed to retrieve the assets, settle all of his debts and taxes and distribute the remainder to his legal beneficiaries. Once that is done, the administration process shall end. All in all, the entire process is estimated to take around 2 years, more or less.
In practice, there are cases where the process would go far beyond 2 years. The reasons are:
- Beneficiaries couldn’t agree on the appointment of an administrator.
- The administrator fails to secure sureties. If so, the administrator would need to apply for an exemption from the High Court. Such takes time.
- The administrator is unfamiliar with the estate administration process. I find this to be normal as who does “all of these” on a regular basis.
The above situation is true in cases where the man’s assets are “fully-paid”. But, if he owes mortgages and car loans for his houses and cars, these debts need to be serviced continuously even upon death. Who shall foot in these debt bills? Is it all of his beneficiaries or just some of his beneficiaries? And, what if:
- Beneficiaries couldn’t agree upon this?
- Beneficiaries don’t have the means to service his debts?
If these debts are not serviced, his houses and cars could be repossessed by the bankers. Such may cause his beneficiaries to lose their inheritance that sums up to be a significant portion of his RM 2 million.
Now, here’s the good news.
Such a predicament could be avoided if the man practices estate planning. They include having an efficient plan to retain and distribute his millions to his family members with simple tools such as will and trusts.
To find out how you could protect your family’s finances efficiently, kindly fill up your details below and book yourself a 30-minute consultation worth RM 500. I would promise you that you’ll walk away with strategies that can help you save, retain and preserve your financial legacies to your intended beneficiaries.