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When the Distribution (Amendment) Act 1997 was tabled last year, it was well received.
Not only does it ensure equal treatment for women, it also provides for the elderly
in line with the move towards a more caring society.
The Distribution Act 1958, which applies to non-Muslims in Peninsular Malaysia and
Sarawak, dictates the distribution of a deceased's estate in the event that he or
she dies intestate (without a will). With the amendments to this Act, women are now
accorded the same status as their husbands in terms of the distribution of their
estates upon their demise.
As for the elderly, the amendments ensure that elderly parents also receive a part
of their deceased child's estate (see Table on Page iv).
These objectives have been achieved, but in doing so other implications have come
up, says Rockwills Corp Sdn Bhd chief executive officer Saw Leong Aun.
One major implication is on the distribution of the assets in the event that the
elderly parent(s) passes away, before the executor receives the Letter of Administration
(LA) required for the administration of the deceased's estate.
"The application for an LA is a long process; it often takes a few years during
which a lot can happen. Meanwhile, all assets in the estate are frozen until the
LA is granted," Saw says.
Take, for instance, the following scenario. Mr Ooi recently passed away after a long
illness leaving behind a wife and an elderly father. As he died intestate, his estate
will be distributed according to the Distribution (Amendment) Act 1997, which means
that his wife and elderly father will each receive half of his estate.
Mrs Ooi then applies for an LA that authorises her to administrate her late husband's
estate. While waiting for the LA, however, the elderly Mr Ooi passes away due to
old age.
What happens to his 50 per cent share of his late son's estate? Does it go to Mrs
Ooi, or will it form part of the old man's estate and in turn go to his other children?
According to Saw, in this scenario the 50 per cent share that went to the elderly
Mr Ooi will become part of his own estate, which will then in turn be distributed
according to his will or according to the Distribution Act. This would mean that
Mr Ooi's brothers and sisters can claim the 50 per cent share that originally went
to their elderly father.
"This can create more hardship for the widow. If, for instance, the brothers
and sisters insist on living in half of the house, it can cause difficulties for
her," explains Saw.
To overcome all these implications, he believes that it is best for everyone to draw
up a will as by doing so, one can dictate the distribution of one's assets.
"You should specify everything in a will to ensure that everyone gets what you
want them to get," he says, adding that a will supercedes the Distribution Act.
A will also helps to speed up the administration process of the estate. It takes
about 21/2 to three years to obtain an LA, but if you have a will the executor needs
to apply for a Grant of Probate which takes about six months to a year to obtain,"
Saw explains, adding that the time- frame for a Grant of Probate is shorter as it
has less requirements. Besides taking a long time, an LA also requires an administration
bond signed by two sureties of guarantors who must own assets that are equivalent
to the value of the deceased's estate.
However, if the deceased's estate is RM600,000 or less and consists of movables only
(no landed property), it can be administered without the need for sureties by Amanah
Raya Bhd (formerly known as the Public Trustee).
Drawing up a will
When writing one's will, one has to be very careful as it is a legal binding document.
Therefore, it is always advisable to consult a lawyer or a professional will-writer
to ensure that the will complies with the Wills Act 1959 and is written with the
required contents and in the proper terminology.
Rockwills legal adviser Lim Sian Pheng says that sometimes, one may have used a simple
term without realising that it is a technical term with certain implications. He
gives an example of a woman who wanted to bequeath all her assets to a beneficiary.
"She wrote a will saying that she would give all of her personal estate to the
beneficiary, not knowing that in legal jargon, the term ëpersonal' refers only to
moveable assets," he adds.
Among the necessary contents in a will include an opening clause that identifies
yourself, a revocation clause which revokes all other earlier wills that you may
have made, appointment of the executor(s) of your will, asset distribution, your
signature, and the signature of two independent witnesses who are not beneficiaries
of your will.
Two very important clauses are the residuary clause and the substitute beneficiary
clause, Saw says.
A substitute beneficiary clause, he explains, ensures that if anything happens to
your main beneficiary, your estate will go to substitute beneficiaries. "For
instance, you leave your entire estate to the spouse, and you name your children
as the substitute beneficiaries.
"If anything happens to the spouse like your spouse dies before you, your estate
will automatically go to the substitute beneficiary which are your children,"
he explains.
A residuary clause ensures that any asset accumulated after the will was made, would
be distributed according to the will. Otherwise, these additional assets will be
distributed according to the law of intestacy (the Distribution Act).
"This is even more important if you have specifically stated in your will, all
your actual assets," Saw adds.
While awareness about will-writing has certainly increased, the number of people
who actually have written their wills has not grown in tandem. "People are aware
of the need for a will, but it is the old habit of procrastination," Saw says.
Rockwills, which provides professional will-writing services through its Trust Wills
franchise network, has seen its business double every year since it was set up in
1995.
Saw adds, however, that the figure is not large; only 5,000 of Malaysia's population
have wills with Rockwills through its 310 franchisees nationwide.
"Although the number is improving, we still have a long way to go. The good
news, however, is that the awareness about will-writing has increased," he adds.
Saw feels that there is still a misconception that only the very rich should have
wills.
"However, the average Malaysian owns a car and a house, and has a savings account.
They should protect these assets with a will," he says.
A will, says Saw, is not about money alone. "If you have young children who
are minors, you can use a will to appoint guardians for them in the event that anything
happens to you and your spouse. Without a will, the court will appoint a guardian
and you have no say as to who should be appointed," he cautions.
Estate planning and will writing, says Saw, is an essential part of one's personal
financial planning.
"When you buy insurance, you have protection. When you open a savings account
or make an investment, you are making your money work for you.
"The last part of financial planning that you should look at is to ensure that
all these assets will go to the people you love, and this is where estate planning
and distribution comes in."
Pitfalls of not
having a will
Still wondering why you should write a will? The following is what happens if
you do not, excerpted from All You Need to Know About Wills by Saw Leung Aun (Times
Publications):
The law takes control
Once a person dies intestate, his or her estate will be distributed according to
the law, which dictates who should inherit the estate, and in what proportion. Sometimes,
it may not be according to how you would want your estate to be distributed. Without
a will, a beneficiary's right is not determinable except for the share that he or
she is entitled to legally.
Letters of Administration are required
Should intestacy occur, a Letter of Administration is required for the purpose of
administering your estate. An administrator needs to be appointed to manage your
estate and distribute its assets according to the law. To qualify as an administrator,
the person must get the consent of all the beneficiaries before he or she can act.
The administrator who is finally chosen may not be the person of your choice.
Costly delays in estate administration
The application for Letters of Administration is a long process and takes time due
to the fact that there may be difficulties in deciding the appointment of the administrator,
and that an administration bond must be provided by two guarantors who must each
have a net worth equivalent to the value of your estate.
Risk of abscondment
As the administrator is not someone appointed by you, there is the inherent risk
that the administrator may abscond with your estate. In this case, the guarantors
will have to bear the responsibility of refunding the loss.
No protection for partners, step-children or aged relatives
Certain categories of people are not recognised as beneficiaries under the law, including
a "live-in" partner, stepchildren, or a relative (not parents) who has
brought you up. Without a will, the interests of these "special" people
are not protected because there are no provisions to cater to their needs.
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