Let’s say we have Ryan and Mia, husband and wife. 

They are Malaysians, non-Muslims, and reside in Malaysia.

Ryan earns RM 11k in monthly income as a project engineer. Mia earns RM 5k a month as a school teacher. They co-own and live in their RM 900k home, where their mortgage outstanding is RM 800k and their monthly installments is RM 4k presently. In addition, they each own a full-paid car, have their own savings and EPF accounts and have no other debts apart from their home mortgage. 

Question 1:
Will Mia Inherit Ryan’s Estates Automatically if he Passes on?

In short, the answer is no. 

First, Ryan’s estate which include his “stake” in the property, his car, and savings accounts shall be frozen immediately upon deceased. The ownership cannot be transferred. Hence, there is no such a thing as “automatic inheritance”. 

The exception is for Ryan’s EPF account and life insurance policies (if any). Thus, Mia can inherit her share of Ryan’s EPF and life insurance proceeds a lot quicker as these assets are not frozen and do not form part of Ryan’s estates. This could be vital for Mia as she may use these proceeds to retain their home and sustain her current lifestyle.


Question 2: 
Will Ryan’s Debts Be Canceled Off Immediately Upon Death?

Unfortunately, debts don’t “die” together with the deceased. 

They live on and require continuous servicing as if the “deceased” is still alive. It is definitely a misconception to believe that debts end once a debtor passes on. 

In Mia’s case, she needs to continue servicing the house mortgage of RM 4k per month upon Ryan’s passing. Now, what if Ryan has a MRTA policy? Could having such be helpful? Let’s examine. Supposedly, Ryan has a MRTA policy that covers RM 400k. Upon death, the mortgage will be reduced from the original RM 800k to RM 400k. That is great. But, the installments remain at RM 4k a month and it will not be “cut to half”. 

In short, MRTA policies can reduce outstanding mortgages but not installments. For Mia who’s earning RM 5k a month, she will be burdened for she is expected to continue servicing the RM 4k a month in mortgage installments which is 80% of her monthly income. 

Hence, this explains the significance of Ryan having EPF and life insurance. Also, it is vital for Ryan to ensure that Mia is nominated so that Mia could receive the proceeds and use them to service these debt installments. Otherwise, Mia shall be forced to use her life savings to service them. Or worse, if Mia fails to service these debts, she would risk losing the RM 900k home. 


Question 3: 
What if The House is Fully Paid?

So, assuming that Ryan leaves behind RM 1 million in EPF & insurance proceeds to Mia. Mia uses RM 800k to settle the mortgage in full. Hence, the question is: “Will Mia inherit Ryan’s stake and become the sole owner of the house?”. 

The answer is – It depends. 

If Ryan bequeaths his stake in the property to Mia via a valid written will, yes. In this case, there is no ambiguity. With a written will, the will’s executor would be able to apply for the Grant of Probate from the High Court, collect all his estate, and distribute them to Ryan’s beneficiaries, after settling off Ryan’s debts. Thus, if Mia is named to be the sole beneficiary of the property, Mia shall then be the property’s sole owner. She could administer property matters (rent, renovation, disposal, …) individually. That’s freedom. 

But, if Ryan nominates his parents to inherit his “stake” in the property, Mia will co-own the home with her parents-in-law. Decisions on rent, renovation, selling off shall be made unanimously. This means if Mia wishes to sell off the property at RM 1 million at a future date, her parents-in-law must also be agreeable with this in order for the property to be transactable. 


Question 4: 
What Happens if Ryan Fails to Write a Will?

Let’s say Ryan owns 50% stake in the property. 

Assuming that he has no child, his stake will be distributed 50:50 to Mia and his parents. As such, the ownership to this RM 900k home would be as follows: 


Such distribution is stipulated by the Distribution Act 1958. 

The process to transfer the ownership of Ryan’s estates to his beneficiaries shall take a much longer time to complete as there is no written will. The delay could be caused by key factors such as: 


a. Failure to appoint an administrator quickly. 
b. Failure to locate all assets & liabilities. 
c. Failure to secure two sureties / guarantors (if assets are worth >RM 600k).


This explains why estates worth billions remain frozen for years in Malaysia. It is not because of a lack of beneficiaries but a lack of estate planning. 

Conclusion: 

The above are 4 main misconceptions arising from a lack of estate planning. For the case above, it’s helpful for Ryan and Mia to engage an estate planner that is able to formulate a complete estate plan to eliminate delays, unintended issues and future problems arising from having the absence of it. 

Here, I’ll list down some pointers that we work on in planning our estates: 


a. Nomination of EPF and life insurance policies. 
b. Ensuring spouse has cash reserves to continue service debts. 
c. Write a valid will. 


Estate Planning:

1. Sim & Rahman
2. Nathalie Annette Kee – Thomas Philip (Principal Associate)
3. Financial Planner: Stephen Yong, Wealth Vantage Advisory


Ian Tai
Ian Tai

Financial Content Machine. Dividend Investor. Produced 500+ Financial Articles featured in KCLau.com in Malaysia and the Fifth Person, Value Invest Asia, and Small Cap Asia in Singapore. Regular Host and Presenter of a Weekly Financial Webinar with KCLau.com. Co-Founded DividendVault.com, an online membership site that empowers retail investors to build a stock portfolio that pays rising dividends year after year in Malaysia and Singapore.

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