Estate planning is a crucial component of money management. Let’s look at Jim, a hypothetical Malaysian stock investor with a wife and two adult children.
Over time, he has built a portfolio comprising dividend stocks listed in Malaysia and Singapore. But what happens when he passes away?
To begin with, Jim’s portfolio and bank accounts will be frozen upon his death. There are three ways for his portfolio to be “unlocked”, each differing in terms of speed, clarity, and estate management and distribution.
1. If Jim has not written a will
Jim’s wife and children would need to apply for a letter of administration and appoint a representative – or representatives – to become the administrator of the estate. This could be done at the high courts, a district land office, or through Amanah Raya, depending on the size of the estate.
Upon receiving the letter, the administrator would manage Jim’s estate, settle his outstanding debts and taxes, and distribute the remainder based on the ratios stated under the Distribution Act 1958: a third to Jim’s wife, and two thirds to his children.
Depending on the complexity of the situation, the entire process could take between two and five years.
Some questions to be asked are:
- Are Jim’s wife or children the best candidates to administer his estate?
- Will Jim’s estate be administered and distributed according to his wishes?
- Is it desirable for Jim’s portfolio to be frozen during the process, which could take years?
Without a will, there would be a lot of ambiguity as to how Jim’s portfolio should be managed. Also, the estate process would be more costly and tedious, given the additional paperwork and coordination between his family members, legal team, and stakeholders.
2. If Jim has a Malaysian will
By being clear on how the estate is to be administered and distributed, a will would mean fewer headaches and more money saved for Jim’s loved ones.
Jim would have appointed an executor for his estate, eliminating ambiguity over its administration. He would specify how his portfolio is to be managed, and choose to liquidate stocks for proceeds to be distributed to his beneficiaries.
Jim would also state his preferred ratio of distribution, e.g. 100% to his wife, or a 50-50 share between her and their children.
Alternatively, he could decide against immediate liquidation to ensure a long-term payout for his loved ones. He could form a testamentary trust within his will and instruct the executor to hold on to his shares for a specified number of years, before they are liquidated or transferred to his heirs.
The process could be reduced to between one and two years, instead of up to five years.
Now – what if Jim also has 100,000 shares in a Singaporean company?
3. Does Jim need a Singaporean will?
This depends on the stockbroking house Jim uses. If he holds his shares with a Malaysian stockbroker, these shares would be administered in Malaysia via his Malaysian will.
If he holds shares with a Singaporean broker but has a will in Malaysia, the executor would need to apply to a Malaysian high court for a grant of probate to administer his Malaysian estate. Jim’s estate in Singapore would be frozen in the meantime.
Once the Malaysian estate is settled, the Malaysian will would then be sent to Singapore for a “reseal”, to get a Singaporean grant of probate to administer Jim’s estate there. A fee in Singapore dollars would be imposed, which could get expensive.
However, if Jim has wills in both Malaysia and Singapore, the process to distribute his estates in both countries could be carried out concurrently. This would be more cost-effective and efficient, especially if he has a sizable holdings.
Additionally, his heirs need not wait one to two years for his Malaysian will to be administered before starting the legal process in Singapore.
This article first appeared in KCLau.com. Ian Tai is a financial content writer, dividend investor, and author of many articles on finance featured on KCLau.com in Malaysia, and ‘Fifth Person’, ‘Value Invest Asia’ and ‘Small Cap Asia’ in Singapore.