Q1: How does an executor or administrator obtain the power to deal with a deceased’s estate?
After a person passed away, the first step is to find out whether the deceased left a Will. Depending on the existence of a will and the size of the estate, there are several different ways to obtain power to deal with the estate of the deceased.
Q2: With Will?
- When there is a valid will and an executor has been named in the Will, the executor should apply for the Grant of Probate of the Will (section 3 of the Probate and Administration Act 1959 (“PAA 1959”)) as soon as practicable, but not exceeding 3 years from the demised of the Testator.
- If application of Grant of Probate/LA for the 1st time has exceeded 3 years, then the Application MUST set out the reason(s) in the affidavit in support of the Originating Summons (O.71, r.5 (6))
- If there is a valid Will, but either the executor named in the Will had predeceased the testator or no executor had been appointed in the Will, the person intending to be the administrator may apply for grant of Letter of Administration with the will annexed at a High Court (section 16 of the PAA 1959). The Court grants Letter of Administration to such person as the Court deems fit to administer, in the following order: a universal or residuary legatee:
- a personal representative of a deceased universal or residuary legatee;
- such person or persons, being beneficiaries under the Will, as would have been entitled to a grant of Letters of Administration if the deceased had died intestate;
- a legatee having a beneficial interest; and
- a creditor of the deceased.
Q3: Without Will?
If a person dies intestate, the person intending to be the administrator may apply for grant of Letter of Administration (section 30 of the PAA 1959). Depending on the size of the estate, there are different ways to obtain the Letters of Administration:
- If the gross estate consists of wholly or partly immovable property, for example, land, a house, which exceeds RM2 million (from 01.09.2009-14.07.2024); Note: on or prior to 31.08.2009, the threshold stood at RM600,000.00), the person intending to be the administrator will have to obtain Letter of Administration at the High Court (section 30, PAA 1959). The Court shall grant administration to one or more of the persons interested in the residuary estate of the deceased, unless by reason of the insolvency of the estate or other special circumstances the Court thinks it expedient to grant administration to some other person (s. 30, PAA 1959);
- If the estate is a small estate, the person interested in the estate shall go to the Estate Distribution Unit of the Department of the Director-General of Lands and Mines (“JKPTG”) or the Land Office to get Letters of Administration (section 4, Small Estates (Distribution) Act 1955 (“SEDA 1955”)). The Letters of Administration will be in the form of a Distribution Order.
Small estate refers to the estate of a deceased person consisting (section 3(2), SEDA 1955):
A. wholly or partly of immovable property; and
B. not exceeding RM2,000,000 (prior to 15.07.2024) in total value at the time of application for summary administration; or
3. If the gross value of the estate is for only movable property and is less than RM600,000, and no person is entitled to apply for Grant of Probate or Letters of Administration, one may apply for summary administration via Amanah Raya Berhad (section 17, Public Trust Corporation Act 1995). Letters of Administration in the form of a Declaration or Order will be issued.
Q4: What is the next step after the Court has granted the Probate or Letters of Administration?
After the Court has granted the Probate or Letters of Administration, the personal representative (that is, the executor or the administrator) will have to do the following:
- collect all the deceased’s assets;
- pay off the deceased’s debts and liabilities (if any); and
- distribute the estate in accordance with the deceased’s will if there is one, otherwise to distribute the estate in accordance with the Distribution Act 1958.
Q5: How does the personal representative transfer the immovable property from the estate of the deceased to the beneficiary or a third-party purchaser?
The first step is for the personal representative to register the vesting of the property forming part of the estate of the deceased to himself as representative at the land office (section 346, National Land Code 1965). The land office will endorse on the respective title deed that the property is vested in the personal representative “as representative”.
The second step depends on whether the deceased died leaving a will or intestate. If there is a valid will, the personal representative can transfer the property to the beneficiaries through presentation of the memorandum of transfer at the land office.
By contrast, if the deceased has died intestate, the personal representative will need to obtain the requisite order under section 60 of the PAA 1959 from the High Court sanctioning the transfer before the presentation of the transfer can take place at the land office.
If, instead of being transferred to a beneficiary, the property is to be sold to a third party purchaser, an order of the High Court under section 60 of the PAA 1959 sanctioning the sale has to be obtained before the presentation of the transfer can take place at the land office.
Q6: How much is the stamp duty for the transfer of the property from the estate of the deceased to the beneficiary and the third-party purchaser?
The stamp duty for the transfer of the property to the beneficiary, regardless of whether the deceased has left a will, is RM10 (Item 32(i), First Schedule, Stamp Act 1949). But note that, the portion of share in the property given by the beneficiaries who renounced their rights will be subject to full ad valorem stamp duty. But note the Finance (No. 2) Act 2023 [Act 851] which amends Item 32 of First Schedule by substituting for paragraph (h) and the particulars relating to it the following:-
- “(h) Of any property—
- by way of gift (whether See Gift and subsection 16(1)
- by way of voluntary
- disposition or otherwise)
- by way of release or RM10.00
- renunciation by a beneficiary
- of a deceased estate to another
- beneficiary entitled under
- the same estate
By virtue of the amendment to Item 32(h)(ii) above, now the nominal stamp duty is payable on those portion of estate renounced by a beneficiary to another beneficiary under the same estate.
By contrast, the stamp duty for the transfer of the property to the third party purchaser is the full ad valorem stamp duty [Item 32(a), First Schedule, Stamp Act 1949 (as amended by the Finance Act 2018 (“FA 2018”) which came into effect on 1 January 2019)].
Q7: How much is the real property gains tax (“RPGT”) for the transfer of the property from the estate of the deceased to the beneficiary and the third-party purchaser?
When a property forming part of the estate is vested in the personal representative, there is no RPGT payable as the disposal price of the property is deemed equal to acquisition price of the property (paragraph 3(1)(a), Schedule 2, Real Property Gains Tax Act 1976 (“RPGT Act 1976”)).
When the personal representative transfers the property to a beneficiary, there is also no RPGT payable too (paragraph 3(1)(a), Schedule 2, RPGT Act 1976). Nevertheless, if the beneficiary subsequently disposes of the property, the beneficiary will be deemed to have acquired the property on the date of transfer of ownership of the property to the beneficiary and the acquisition price of the property will accordingly be the market value of the property on such date (paragraphs 15(2), 15A(c) and 19(3A), Schedule 2, RPGT Act 1976).
If the personal representative transfers the property to a third-party purchaser, the personal representative will need to pay RPGT in accordance with the rate of tax specified in Schedule 5 of the RPGT Act 1976 (as amended by the FA 2018 which came into effect from 1 January 2019). The personal representative will be deemed to have acquired the property on the date of death of the deceased and the acquisition price of the property will accordingly be the market value of the property on such date (paragraphs 15B(1) and 19(3), Schedule 2, RPGT Act 1976).
Q8: What is the latest laws in respect of Small Estate?
It is contained in Small Estates (Distribution) (Amendment) Act 2022, which has been gazetted on 25.01.2022, but only come into force on 15.07.2024.
8.1 What are the fundamental changes?
(1) the words “Land Administrator” has now been substituted for “Estate Distribution Officer”, except in the definition in ss.2, 23, 24, 26B and 26c of the Principal Act.
(2) Appointment of “President of Estate Distribution: s.2A(1), “Deputy President of Estate Distribution” (under s.2B(1)) and “Estate Distribution Officers” (s. 2C).
(3) s.2(g), the definition of “property: means immovable property and moveable property”.
(4) Fundamental Change: Subsection 3(2) of the Principal Act is amended:-
(a) by substituting for the words “wholly or partly of immovable” the words “of any”. This swift simply means the fundamental change from wholly immovable property/or partly immovable property to that of any property, which shall cover cash, shares, other estates.
(b) the threshold of the Small Estate has been revised upwards from RM2 Million to RM5 Million in aggregate, there is NO MORE prerequisite of immovable estate, but instead could be of any estate(s).
(c) substituting “Director of Lands and Mines” or the “Director General of Land and Mines” as the case may be, the words “the President”.
(d) new sections 8B: Summary Distribution Order by Estate Distribution Officer if:
(i) estate consists only movable property not exceeding RM600,000 in total value; or
(ii) any subsequent application, if movable property which has not been declared in the petition and does not exceed RM600,000 in total value; or
(iii) it is filed for the purpose of removing a trustee when a minor has attained the age of majority.
(e) s.8C: Letter of Administration pendent lite wherein pending any distribution order, LA may be granted to a petitioner or any beneficiary as the Estate Distribution Officer may appoint, limited so that the administrator shall not be empowered to distribute the estate and subject to the control and direction of the Estate Distribution Officer as the later deems fit and subject to limitation the administrator so appointed shall have the rights and powers of a general administrator.
(f) Amendment on s.10:
(a) in the shoulder note, by inserting after the words “or persons of unsound mind” the words “or patient”;
(b) in subsection (1)-
(i) by inserting after the words “to be a minor or a person of unsound mind” the words “or a patient”;
(ii) by inserting after the words “the guardian of the minor or person of unsound mind” the words “or the next friend of the patient”; and
(iii) by inserting after the words “person of unsound mind” at the end of the subsection
the words “or a patient”;
(c) by substituting for subsection (2) the followings:
(a) in relation to appointment of guardian, the Estate Distribution Officer shall have regard to any personal law or custom affecting the minor or person of unsound mind; and
(b) in relation to appointment of a next friend, the Estate Distribution Officer shall have regard to any personal law or custom, and any circumstances or medical reason rendering a patient unable to represent himself; and
(d) “(3) The next friend appointed under the section shall assist the patient in any matter relating to proceedings for the distribution of the estate so far as not detrimental to the interest of the patient.”
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, which was later specified as July 15, 2024, as per P.U. (B) 267/2024.
For further information, please contact:
K M Tan & Tee
kmtantee@gmail.com
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