Oon Hooi Lin explains the advantages of making a Will
When a person passes away, all his assets will be frozen until the High Court has granted the probate (where there is a valid Will) or letters of administration (where there is no Will). Hence, one of the key objectives of estate planning is to “unfreeze” the frozen assets of the estate of a deceased person as soon as possible after the deceased’s death so that financial hardship to the deceased’s dependants can be minimised or avoided.
WHAT IF A PERSON DIES WITHOUT A WILL
Where a person dies without leaving a Will, he is said to have died intestate. To “unfreeze” the deceased’s assets, letters of administration must be granted by the High Court to an administrator. Under Section 30 of the Probate and Administration Act 1959, any person “interested in the estate of the deceased person” is entitled to apply to be the administrator. One of the potential problems when a deceased dies without leaving a Will is that disputes may arise among persons having an interest in the estate as to who should be the administrator of the deceased’s estate.
It is also harder to identify and locate the assets of the deceased without a Will. The distribution process is longer, the costs are higher and there is the additional need for the administrator to procure two persons to act as sureties to provide an administration bond equivalent to the gross value of the deceased’s estate. When a deceased has children who are minors, i.e. below the age of 18, the courts will appoint a guardian of its choice to take care of the welfare of the minors.
Further, assets will be distributed strictly in the manner prescribed in Section 6(1) of the Distribution Act 1958 which may not be in line with the person’s wishes. For example, if a person dies intestate leaving a spouse, issue or issues and parent or parents, the surviving spouse shall be entitled to one-quarter of the estate, the issue or issues shall be entitled to one-half of the estate and the parent or parents the remaining one-quarter.
ADVANTAGES OF HAVING A WILL
A Will is defined in Section 2 of the Wills Act 1959 as “a declaration intended to have legal effect of the intentions of a testator with respect to his property or other matters which he desires to be carried into effect after his death and includes a testament, a codicil and an appointment by will or by writing in the nature of a will in exercise of a power and also a disposition by will or testament of the guardianship, custody and tuition of any child.”
By making a Will, a testator can largely avoid the potential problems which may arise in an intestacy. A testator exercises control over who should be the executor and/or trustee who can apply to the High Court for a grant of probate to manage and administer his assets and affairs according to his wishes after his death.
A testator is also able to dictate who will be entitled to his assets as well as the extent of their entitlement. He can appoint guardians to look after the interest of his minor children. He has the powers to create a testamentary trust for heirs with special needs, his children’s education, his elderly parents’ living expenses or the charities of his choice. He can also give directions as to his funeral arrangements (although this is rarely done due to its impracticality). Overall, in testacy situations, the distribution process is faster and the costs of administering the estate is reduced.
There is also no requirement to procure sureties to provide an administration bond equivalent to the gross value of the deceased’s estate.
REQUIREMENTS OF A WILL
Under the Wills Act 1959, in order for a Will to be valid, it must satisfy the following requirements:
(a) The testator must have attained the age of majority, i.e. 18 years.
(b) The testator must be of sound mind.
(c) The Will must be in writing.
(d) The Will must be signed by the testator.
(e) The Will must be attested by two witnesses in the presence of each other.
Beneficiaries under a Will cannot be witnesses to the Will, otherwise they will lose their entitlement under the Will.
A Will takes effect only upon death of the testator and may be revoked at any time before his death. A Will is revoked in each of the following circumstances: (i) when a later Will is made by the testator; (ii) upon the marriage of the testator; (iii) on the written declaration by the testator with regards to his intention to revoke the Will; (iv) upon the intentional destruction of the Will by the testator or some other person in his presence and under his direction; or (v) upon the conversion of the testator to Islam.
There is no requirement for a Will to be stamped or registered with any authority.
FACTORS TO CONSIDER WHEN MAKING A WILL
The testator should consider a number of factors prior to the making of his Will.
Who should the Testator select as Executor(s)
Common sense dictates that the testator should appoint someone he can trust to administer his estate. The executor can be an individual aged 21 years or older; a family friend or a professional adviser or it can be a trust corporation. In the case of individuals, it is generally advisable to appoint no less than two executors to administer the estate in case one of them should pre-decease the testator or declines to act. The size of the estate and the complexity of the Will and testamentary trust should be considered when the testator selects the executor(s). Other factors to consider are the executor’s age, knowledge and experience, impartiality, accountability and continuity.
What assets does the Testator own
The Will should cover all assets of the testator. As such, a list of assets containing particulars of all the assets for easy identification by the executor should be prepared and periodically reviewed and updated. Assets commonly included in Wills are real properties, cash, bank deposits, shares, motor vehicles, trust properties, personal chattels such as jewellery, books and paintings, intangible assets such as contractual rights, intellectual property rights, and other benefits and interests which are capable of transmission or assignment. Some properties do not pass under the Will, for instance, proceeds from insurance policies and Employees Provident Fund where nominations of beneficiaries have been made. A residuary clause should be included in the Will to deal with the distribution of assets which are acquired after the making of the Will or are not specifically covered in the Will.
Who does the Testator wish to benefit
Generally, the testator has the right to decide who he would like to benefit, as well as the extent to which the beneficiaries will benefit, under his Will. However, he is obliged under the Inheritance (Family Provision) Act 1971 to make reasonable provision for the maintenance of his spouse, unmarried daughter, infant son, or a child under disability. If any of the said persons are omitted from the Will, they can apply to the court for maintenance orders.
How does the Testator wish to benefit the Beneficiaries
Specific or general gifts can be bestowed, whether with or free of all liabilities, charges and costs. A gift can be given outright or can be held under a trust.
Creation of a Testamentary Trust
A testator should consider whether there is a need to create a testamentary trust. A testamentary trust is a trust that is created by a person under his Will. It is a trust which only comes into effect upon the death of that person. The most common uses of a testamentary trust are as follows:
(a) To hold residential property so that dependants can live in the property until they are financially independent or until their death. This is to prevent the property from being sold prematurely. The property can be sold and its proceeds given to the beneficiaries when the trust ends.
(b) Instead of giving a lump sum to beneficiaries, a testamentary trust can be used to give them a monthly allowance over a period of time. This can be used where beneficiaries are too immature or otherwise unfit to responsibly handle a lump sum payment.
(c) A testamentary trust can be used to motivate a beneficiary with payments being made conditional upon the beneficiary achieving specified goals, e.g. obtaining a university degree.
(d) Leaving assets to children will have the effect of impliedly creating a testamentary trust where the trustee will hold the assets on trust until each child attains the age of majority.
Appointment of Guardian and Trustees
Where there is a minor beneficiary named in the Will, the testator should appoint a guardian and trustees. A guardian is needed to take care of the welfare of the minor children if both parents have passed away whereas the trustees will hold the properties on trust for the minor till he has attained the age of majority or in accordance with the terms of the testamentary trust created in the Will.
CAN A WILL BE CHALLENGED?
A Will is only valid if all legal requirements have been complied with.
Further, a Will can be challenged on allegations that the contents have been altered, the signature of the testator has been forged, the execution of the Will was not properly witnessed, the testator was of unsound mind or under undue influence at the time when the Will was made or if there are ambiguities or important omissions in the Will.
A testator is well advised to seek professional assistance when writing his Will to avoid the pitfalls of an invalid Will or a Will which can be easily subject to challenge.
In recent years, as a result of globalisation, more people have come to own properties in more than one country. If a Will is made and proved in a Commonwealth country, the executor can apply to the High Court to re-seal the grant of probate in Malaysia. Under certain circumstances, e.g. when the Will is made in a civil law jurisdiction and re-sealing of the grant of probate is not permissible in Malaysia, separate Wills dealing specifically with the assets in each country should be drawn up. As the law governing the disposal of real properties under a Will varies from country to country, specific legal advice from the relevant foreign jurisdictions should also be sought. Matters get a little more complex when a deceased’s intestate estate comprises foreign assets. Which jurisdiction’s inheritance law applies will depend on the domicile of choice of the testator. As a general rule, the law of domicile of the deceased applies in the case of movable properties. In the case of immovable properties, it is the lex situs
, i.e. the law applicable in the country where the immovable property is situated, which will apply.
Testators who own foreign assets should also bear in mind that many countries impose some form of duty or tax arising upon the death of the testator which may be called death duty, estate duty or inheritance tax. Careful estate planning can most certainly reduce the duty or tax payable.
NON-APPLICABILITY TO MUSLIMS
The Wills Act 1959 and the Distribution Act 1958 apply only to non-Muslims. Muslims in Malaysia are bound by Islamic laws which are out of the scope of this article.