Big Changes for Small Estates (Distribution) Act 1955

The Small Estates (Distribution) Act 1955 (‘the Principal Act’), inter alia, facilitates the distribution of small estates of deceased persons and matters incidental thereto.
 
The Small Estates (Distribution) (Amendment) Act 2022 (‘the Amendment Act’) was passed by the Dewan Rakyat (the House of Representatives) and the Dewan Negara (the Senate) on 26 October 2021 and 22 December 2021 respectively. The Amendment Act received Royal Assent on 19 January 2022 and was published in the Gazette on 25 January 2022. It will come into operation on a date to be appointed by the Minister of Energy and Natural Resources (‘the Minister’) by notification in the Gazette.
 
The Amendment Act will introduce significant amendments to the Principal Act. A summary of the main amendments are discussed below.
 
Definition of small estate
 
Under the existing definition of a ‘small estate’ in the Principal Act, an estate of a deceased person must include immovable property and have a total value not exceeding RM2.5 million. In addition, the person must have died intestate.
 
The definition of ‘small estate’ will be amended under the Amendment Act and will henceforth refer to an estate of a deceased person consisting of any property situated in any State and not exceeding RM5.0 million in total value. In addition, a new definition of ‘property’ will be introduced under the Amendment Act to refer to ‘immovable property or movable property or both’.
 
The above-referred amendments are significant in that the value threshold of a small estate will be increased to RM5.0 million, and there will no longer be a requirement for an estate to include immovable property in order to come within the ambit of the Principal Act. These amendments will bring many more estates of deceased persons within the ambit of the Principal Act. It is to be noted that the requirement that the deceased must have died intestate remains a cornerstone for the Principal Act to apply.
 
New framework
 
The Principal Act confers various powers on the Director General of Land and Mines (‘Director General’) and the Director of Lands and Mines (‘State Director’), such as the power to order a petition to be heard by a Land Administrator of a district other than the district in which the property is situated for the general convenience of the parties or witnesses or for the ends of justice.
 
The Amendment Act introduces a new Part 1A to the Principal Act that sets out a new framework for distribution and administration of small estates under the Principal Act. This new Part creates several new offices, namely the President of Estate Distribution (‘President’), Deputy President of Estate Distribution (‘Deputy President’) and Estate Distribution Officer (‘Estate Distribution Officer’), and sets out the powers of these officers under the Principal Act.
 
The powers of the Director General and the State Director under the Principal Act will be assumed by the President. Where the President is unable to exercise his powers for any reason, the Minister will appoint a Deputy President to exercise such powers.
 
The Land Administrator’s power to hear a petition, issue orders for the distribution and administration of a small estate will be assumed by the Estate Distribution Officer (of whom one shall be appointed for each State) except in relation to the distribution of the estate of a deceased who is a member of certain tribes in Negeri Sembilan and immovable property held under native title by a native of Sabah where the powers remain vested in the Land Administrator.
 
Petition for distribution
 
The Principal Act confers jurisdiction on the Land Administrator of the district in which the immovable property is situated to issue an order for the distribution and administration of a small estate upon the petition by a person claiming to be interested in the estate as a beneficiary, a creditor, or a purchaser, or in the instances discussed below, by the penghulu (a village headman) or a settlement officer of the district or locality in which any land owned by the deceased is situated or Amanah Raya Berhad (‘the Public Trustee’).
 
The Amendment Act liberalises the provisions of the Principal Act by providing that a petition may be lodged in any State where any property, and not just immovable property, of the deceased is situated.
 
Where no application has been commenced to obtain a grant of probate or letters of administration or for distribution of an estate under the Principal Act within six months of the death of a deceased, the penghulu or a settlement officer of the district or locality in which any land owned by the deceased is situated or the Public Trustee, shall upon direction of the Land Administrator lodge a petition for the distribution of the estate of the deceased under the Principal Act. The Amendment Act amends this provision in the following respects: (i) the power to direct that a petition be lodged will be changed to a discretion to request that is exercisable by the Estate Distribution Officer instead of the Land Administrator; and (ii) the persons who may be requested to lodge such petition are the Public Trustee or the Majlis Agama Islam, instead of the penghulu or a settlement officer.
 
Summary distribution
 
The Amendment Act introduces a new provision which enables a petitioner or applicant to apply for a summary distribution in the following circumstances:

  1. where the property comprised in a petition consists only of movable property not exceeding RM600,000 in total value; or 

  2. in the case of any subsequent application, where it (i) consists only of movable property not exceeding RM600,000 in total value; or (ii) is filed for the purpose of removing a trustee who is a minor. 
Letters of administration pendente lite
 
The Amendment Act will introduce a provision that permits the Estate Distribution Officer to grant letters of administration to a petitioner or any beneficiary for limited purposes, without the power to distribute the estate and who is subject to such control by, and direction of, the Estate Distribution Officer.
 
Notice of petition for distribution
 
The Principal Act requires the Land Administrator, as soon as possible after the lodgement of a petition for distribution, to serve a notice of the petition and of the date and place of hearing of the petition (‘notice of petition’) on all persons named in the petition as beneficiaries of or claimants to the estate or any interest in the estate or who appear to the Land Administrator to be interested in the distribution of the estate. This provision will be amended by the Amendment Act to impose an obligation on the Estate Distribution Officer to serve a copy of notice of petition only on the petitioner who is then required under the amended provision to serve a copy of such notice on all persons who are named and addressed in the petition as beneficiaries of or claimants to the estate or any interest in the estate.
 
The requirement under the Principal Act for the Land Administrator to cause a copy of the notice of petition to be published will be discontinued under the Amendment Act.
 
Appointment of next friend of a patient
 
Section 10 of the Principal Act which permits the Land Administrator to appoint a suitable and proper person to be the guardian of any beneficiary of or claimant to the estate or any interest therein who is a minor or a person of unsound mind will be extended to allow the Estate Distribution Officer to appoint a person to be the next friend of a ‘patient’ to assist the latter in any matter relating to the proceedings for the distribution of the estate.
 
As a ‘patient’ is defined in the Amendment Act as a person who is a sole beneficiary, suffering from serious illness or injury, or who is bedridden, and unable to attend proceedings under the Principal Act, it appears that a next friend cannot be appointed to assist a patient who is a claimant or one of several beneficiaries.
 
Procedures at hearing of petition
 
The procedures at the hearing of a petition for a distribution order will be modified under the Amendment Act in the following respects: (i) the next friend of a patient will be allowed to cross-examine witnesses; (ii) the Estate Distribution Officer may require the attendance of any person who may be able to give any material information regarding the deceased or his estate; and (iii) where a beneficiary named in the petition is unable to attend the hearing, the Estate Distribution Officer may direct the petitioner to submit a letter of consent from the beneficiary; however, the Estate Distribution Officer may, if he thinks fit, proceed with hearing in the absence of a letter of consent.
 
Order for distribution
 
Section 13(2) of the Principal Act which, inter alia, requires the Land Administrator to direct the share of any infant beneficiary in any immovable property to be registered in the name of a suitable person as trustee and to enter a caveat to protect the interest of such infant beneficiary will be extended under the Amendment Act to require the Estate Distribution Officer to apply these safeguards in respect of a share of immovable property of a beneficiary who is of unsound mind. The expression ‘infant’ will be replaced by ‘minor’ for greater clarity.
 
Sale of land
 
Section 15 of the Principal Act, inter alia, confers discretion on the Land Administrator to order that the land comprised in a deceased’s estate be sold in certain circumstances, such as to prevent excessive sub-division or the holding of small lots by numerous persons in complicated fractions. The Amendment Act introduces a provision to authorise the Estate Distribution Officer to order the sale of the land or any part of it based on the consent of the beneficiaries holding two-thirds majority shares of the land or the relevant part. It is debatable whether this amendment will preclude the Estate Distribution Officer from exercising his discretion to order the sale of land under this provision if less than two-thirds of the beneficiaries agree to the sale.
 
Registration of distribution order
 
Under the Amendment Act, the responsibility to arrange for the registration of a distribution order that relates to land will be transferred from the Estate Distribution Officer to the petitioner.
 
Amendments to order
 
A new provision will be introduced under the Amendment Act to allow the Estate Distribution Officer to amend a clerical error in any order made under the Principal Act, and to make other amendments in accordance with regulations to be made by the Minister.
 
Appeal
 
The Amendment Act will clarify section 29 of the Principal Act by stipulating that the time frame for a person aggrieved to file an appeal to the High Court is 30 days from the date on which the order, decision or act is made or done. Presently, the Principal Act provides that the time frame is the period for an appeal from a Sessions Court.
 
The First Schedule
 
The First Schedule of the Principal Act which sets out the factors to be considered by the Estate Distribution Officer in making an order for distribution of immovable property will be replaced by a new First Schedule which, in addition to factors relating to immovable property, also sets out the factors to be considered in relation to the distribution of movable property comprised in an estate.
 
Comments
 
The Amendment Act will introduce a raft of changes to the existing framework for the distribution of small estates under the Principal Act. First, new and presumably, dedicated offices, namely the President, Deputy President and Estate Distribution Officers, will be created to take over the process of dealing with the administration of small estates from the Director General, State Directors and Land Administrators.
 
Second, the significant increase in the value threshold and the removal of the requirement for an estate to include immovable property in the definition of a ‘small estate’ is likely to result in more petitions being lodged under the Principal Act for distribution of property of persons who died intestate.
 
Other amendments and new provisions also significantly improve and update the framework for administration of small estates in Malaysia.
 
Article by Kok Chee Kheong (Partner) and Tham Zhi Jun (Associate) of the Corporate Practice of Skrine.

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