Let’s say, we have Jim, a Malaysian stock investor. Over time, he built a portfolio comprising dividend stocks listed in Malaysia and Singapore. So, the question is, ‘What happens to Jim’s portfolio and his dividends if he passes away?’.
Well, here is what I’d gathered:
First, Jim’s stock portfolio and his bank accounts shall be frozen and they form a part of his estates upon death. In brief, there are 3 possible methods to ‘unlock’ Jim’s portfolio. However, each method differs in speed, clarity and effectiveness of the management and distribution of Jim’s portfolio to his beneficiaries. Here, I like to expound on them and they are as follows:
Method #1: If Jim has not Written a Will
His beneficiaries need to apply for a letter of administration (LOA) to administer Jim’s estates. So, let’s assume that Jim leaves behind a wife and two children. In his case, his wife and two children (adults) will need to appoint a representative or representatives to become the administrator of Jim’s estate. Today, there are 3 places to apply for the LOA: the High Courts, a District Land Office, and finally, Amanah Raya. The exact place to apply will depend on the size of Jim’s estates.
Upon receiving the LOA, the administrator shall collect Jim’s estates, settle Jim’s outstanding debts and taxes, and distributes the remainder of his estates based on the ratios stated under the Distribution Act 1958 as follows:
Jim’s Wife: 1/3 ; Jim’s Children: 2/3
Depending on the complexity of his situation, the entire process would take 2-5 years to complete. Here, the main questions are:
a. Is Jim’s wife or children the best candidate to administer Jim’s estates?
b. Will Jim’s estates be administered and distributed according to Jim’s wishes?
c. Is it desirable for Jim’s portfolio to be ‘stuck’ in the process for 2-5 years?
Without a will, there would be a lot of ambiguity as to how Jim’s portfolio could be managed upon his death. Also, the estate distribution process is more costly, tedious, and lengthier due to more paperwork and coordination between all his family members, legal team, and his stakeholders.
So personally, this method is highly undesirable.
Method #2: If Jim has a Will in Malaysia
He will save a lot of headache and money for his loved ones. This is because the will document could add clarity as to how Jim’s estate is to be administered and distributed, if it is well-written.
There are several benefits for doing so:
First, Jim will appoint an executor to administer his estate on behalf of him. The appointment is crucial as it eliminates the ambiguity on who shall administer all of Jim’s estates.
Second, Jim can specify how his portfolio is to be managed upon death. Jim can choose to liquidate his stocks and distribute the proceeds to his loved ones. For him, Jim could state his preferred ratio of such a distribution (like Wife: 100% or Wife: 50% and Children: 50% or so on and so forth) in his will document.
Alternatively, let’s say, Jim has 250,000 shares in Public Bank in his portfolio and wishes to retain it for 10 years upon his death for the benefit of his wife. Hence, what he could do is to form a testamentary trust within his will and instruct the executor to hold onto the Public Bank shares for the next 10 years. From which, the shares can be liquidated or to be transferred to his wife.
Third, the estate distribution process can be cut short to 1-2 years, instead of as long as 2-5 years for one who passed on without a will document.
But, what if Jim also has 100,000 OCBC shares? With that, let’s move onto:
Method #3: Does Jim Need a Will in Singapore?
This depends on which stockbroking houses Jim uses.
First, if Jim holds his OCBC shares with a local stockbroker in Malaysia, his OCBC shares shall be administered in Malaysia with a Malaysian will.
Second, if Jim holds his OCBC shares with a Singapore broker, Jim’s OCBC shares shall be administered differently. If Jim has a will in Malaysia but not Singapore, the executor would first apply for the Grant of Probate (GP) to administer all his Malaysian estates from the Malaysian High Court. Jim’s estates in Singapore will be frozen in the meantime.
Then, once the Malaysian estates are settled, the will in Malaysia would be sent to Singapore for a ‘reseal’. This is so that the Grant of Probate (GP) in Singapore could be obtained and be used to administer Jim’s estates in Singapore. There’ll be a resealing fee imposed on this and this cost shall be in Singapore Dollars. As such, it could be expensive.
However, if Jim has a will in Malaysia and in Singapore, the process to distribute Jim’s estates in Malaysia and Singapore shall be carried out concurrently. Hence for Jim, it would be more cost-effective and efficient, especially if he has a large sizable holdings (like SGD 10k, 50k, 100k … etc) and plus, he would not need to wait 1-2 years for his Malaysian will to complete before starting the distribution process in Singapore.
Conclusion: Action Steps to Protect Your Investments
As a starter, it is helpful for stock investors in Malaysia to have a Malaysian will.
Today if you are a savvy investor who owns a brokerage account in Singapore, it would be helpful for you to have a will in Singapore. Likewise, for Singaporeans, if you own substantial investments in Malaysia (properties in KL, JB, Penang and Malaysian stocks with a Malaysian brokerage house), you may want to consider having a Malaysian will.
Here, if you have more specific questions on this matter, please post yours to us at firstname.lastname@example.org.