One of the ways that you could end up with property is through inheritance. It may come across as a financial boon, but a property inheritance journey is not always straightforward. Here is what an heir needs to know about the processes and legal formalities involved including applying for letters of administration through the High Court or SEDA.
There are two usual scenarios in which a person may inherit property. One is through a will and the other is by virtue of the person being the next of kin of a deceased person who died intestate (without a will) as stipulated under the Distribution Act 1958.
For the former, a properly drafted will clearly state the details of the property bequeathed to the beneficiaries. This will make it easier for the applicant (the person appointed to manage the distribution of assets for the deceased) to identify and determine the property. This is important as details of the property must be stated in the list of assets in the application for a grant of representation. The executor appointed in a will is required to apply to the High Court for a grant of probate.
Meanwhile, for the latter, the absence of a will may sometimes pose a challenge as to whom to administer and manage the estate of the deceased (unlike a will, where an executor has been appointed). In this scenario, the court will appoint an administrator to oversee and administer the estate distribution.
We spoke to 2 partners from MahWengKwai & Associates – Gan Chong Chieh and John Chan to obtain insights into the relevant inheritance laws in Malaysia as well as the next steps one needs to take upon inheriting property.
1. What should be done if I inherit property without a will?
In a case where the deceased person died intestate, i.e without a will, a person having an interest in the deceased’s estate can apply for a grant of letters of administration (Administrator of the estates) either at the High Court or the relevant district land office as stipulated under the Small Estate Distribution Act 1955 (SEDA).
It is pertinent to note that the application for a grant of letters of administration (LOA) under SEDA is not automatic. An application under SEDA can only be made if the total value of the inherited property does not exceed RM2 million and there must be immovable property in the name of the deceased person within the jurisdiction of the Land Office. However, it is not compulsory for heirs to go through SEDA and they can opt to go through the High Court.
Whichever option you choose, the efficiency of the process will depend on the availability of dates and the volume of cases that the respective bodies are handling.
2. Applications for letters of administration through the High Court
Application for LOA falls under the Probate and Administration Act 1959 [Act 97] and LOA applications are to be filed through the High Court. Generally, for LOA applications to the High Court, it will be prudent to engage a lawyer to oversee and attend to the whole process.
Documents required for filing at the High Court
To enable the preparation of the cause papers, the executor has to provide the appointed law firm with the following documents:
- copy of the deceased’s death certificate
- the deceased’s last will and testament (if the deceased died testate)
- details of the beneficiaries, assets and liabilities for the law firm to prepare the cause papers
NOTE: The original death certificate and original will have to be filed with the High Court after the application for grant of representation has been set down for hearing.
3. Application for letters of administration under SEDA
Applications under SEDA are referred to as Small Estate Applications, where the value of the immovable property (land or building) and movable property (cash) is less than RM2mil in total value. Management of a Small Estate is subject to the Small Estates (Distribution) Act 1955 [Act 98].
In this case, a lawyer is not required to represent the applicant (a person with a beneficial interest in the property) during the hearing before the Land Administrator. However, the applicant can still seek legal advice pertaining to the procedure under SEDA. The checklist of the documents required to be completed and/or filed with the land office can be found on the MyGovernment Portal.
How to file an inheritance application under SEDA
A person having an interest in the estate and most commonly a beneficiary provided for under Section 6 of the Distribution Act 1958 (hereinafter known as applicant) can apply to the Estate Distribution Unit of the Department of the Director-General of Lands and Mines (JKPTG) or the local Land Office where the deceased’s immovable property is located.
➡️ You can also apply online using the MYeTaPP application.
If the deceased’s immovable properties are located across several states, beneficiaries can choose one of the local Land Offices to submit an application. The Land Office where the first petition is submitted will have exclusive jurisdiction to resolve all the deceased’s immovable properties located in all the other districts and states.
You will need to fill in the application or petition form, also known as Form A.
An application that has been processed will go for a hearing. The applicant/petitioner, deceased’s beneficiaries and other relevant parties will be given a Notice of Hearing stating the date, time and place of the hearing. It is mandatory for persons having served the Notice of Hearing to attend the hearing and the applicant/petitioner is required to provide all original documents.
Once a distribution order has been granted, the order will be registered at the relevant Land Office. For the movable properties, refer to the relevant institutions such as the Road Transport Department of Malaysia (JPJ) for vehicles, Amanah Saham Nasional Berhad (ASNB) for ASB shares and banks for savings accounts.
Documents required for an application under SEDA
You will need to submit the following documents:
- A completed copy of the Petition (Form A) signed before the Commissioner for Oath or Magistrate.
- Evidence of Death – a copy of the death certificate/excerpt of the death certificate from the National Registration Department / Burial Permit / Order for Presumption of Dead of a person from the High Court.
- Copy of both sides (front and back) of the applicant/petitioner’s identity card (compulsory).
- Copy of both sides (front and back) of the beneficiary’s identity card/birth certificate (for beneficiaries under 12 years old).
- Copy of the deceased’s solemnization certificate/marriage certificate – if any.
- Copy of certificate of registration or adoption (for non-Muslims, if any).
- Immovable property title(s) / grant(s) – official search or certified true copy (CTC) from Land Administrator or Registrar of Property or copy of sale and purchase of property (for an immovable property without title or grant).
- Copy of current year’s quit rent receipt – if any.
- Copy of current year’s assessment receipts for buildings or strata.
- Copy of the deceased’s statement of debt – if any.
- Other documents related to the deceased’s asset(s) that are to be included as part of the claim (copy of statement of accounts, stock certificates, vehicle grant).
Here is a summary of the property inheritance application process at the Department of the Director-General of Lands and Mines (JKPTG):
4. Is there a deadline to file the applications for property inheritance?
Under Section 77 of the Probate and Administration Act 1959, a personal representative (the administrator) is not compelled to distribute the estate of the deceased within a year. The personal representative of the estate of the deceased is given time to carry out their duties. Nevertheless, the best practice is for the personal representative to apply for the grant of representation and to distribute the estate of the deceased as soon as practicable.
5. What about property inheritance for Muslims?
Inheritance for Muslims falls under the Syariah law. A Muslim will is known as a wasiat. A Muslim’s estate will be distributed according to faraid (Islamic inheritance law) and a wasiat.
If the deceased did not leave a wasiat, the estate will be distributed entirely according to faraid, whereas if the deceased left a wasiat, 1/3 of the estate will be distributed according to the wasiat and the remainder will be distributed according to faraid, concurrently.
During the wealth distribution process, priority will be given to the provisions of the deceased’s funeral expenses, followed by the payment of outstanding debts. Only after these payments have been made can the remainder of the estates be distributed among the beneficiaries according to Syariah law.
For a grant of representation, the executor under the wasiat can apply to the High Court and in the case of intestacy, a person having an interest in the estate can apply either to the High Court for an LOA or to the Land Administrator of the local Land Office for the distribution order.
➡️ For comprehensive faraid knowledge learning developed by the Malaysian Syariah Judiciary Department (JKSM), you can visit this website. Additionally, Muslim heirs can learn more about the method of calculation for faraid here.
For more information, read The Differences between Will, hibah & faraid
6. Do I have to pay stamp duty for an inherited property?
For inherited property, a nominal stamp duty is required to be paid for the transfer of the property from the estate to the beneficiary(s). However, full payment for registration fees to the Land Office is required for the said transfer of the property.
7. Do I have to pay any form of inheritance tax?
Historically, the inheritance tax was implemented in Malaysia under the Estate Duty Enactment 1941 and other related estate duty legislations in Sabah and Sarawak, but these were repealed on 1 November 1991 and replaced by the Finance Act 1992.
For this reason, there is currently no inheritance tax in Malaysia for inherited property and/or assets.
8. Can foreigners inherit property in Malaysia?
Foreigners can inherit property either through a will or the Distribution Act 1958 as long as the foreigner falls within one of the categories of persons under Section 6 of the Distribution Act 1958.
However, the National Land Code provides that the transfer of a property to a foreigner is subject to approval from the state government and/or the restrictions and limitations (if any) that have been imposed on said property.
In the unlikely event that a property is still in the developer’s name and the land title is yet to be transferred to the name of the deceased person, the first transfer from the developer to the estate of the deceased’s person has to be reflected on the title. This will be followed by the second transfer from the estate of the deceased’s person to the foreign heir. The land title must reflect each stage of the transfer. Do read up on the land title transfer procedure in Malaysia.
9. When inheriting part of a property, what can I do to be the sole owner?
If a person inherits the whole property, it would be easier to decide whether to keep or sell it, rent it, renovate or demolish the building and customize it to a certain architectural design. However, when two or more persons inherit a single property, joint decisions must be made. Each person is considered a co-owner of said property. Therefore, decisions made without the consent of the other owner(s) may result in unwanted disagreements and potential legal disputes.
One way of becoming the sole owner of the inherited property is to purchase the shares of the other co-owners provided they are equally willing to sell their shares. In the event of a deadlock between the co-owners, for example – a dispute on selling or managing the property or one party appears unreasonable, then either party can make an application to the Court to order the sale of the property. The sale proceeds will then be distributed in accordance with the co-owners shares in the property. An order of such a nature is most effective in resolving a deadlock and not prolonging the dispute.
10. Can I dispute a property inheritance in Malaysia? How can it be done?
The most common dispute of property inheritance derives from dissatisfaction with the manner in which properties are distributed in a will. Contesting or challenging a will is never an easy process.
A will can be challenged and declared invalid by the Court on the following grounds:
Lack of Testamentary Capacity
This means that the deceased person did not have the testamentary capacity or was of unsound mind during the drafting, preparation or signing of the will.
Fraud / Forgery
The deceased person’s signature on the will does not bear the genuine signature of the deceased person or the will was not prepared and signed based on the instructions of the deceased person.
The deceased person was coerced into executing the will in the form that it had taken, or the contents and execution of the will were not voluntary.
The will was not read to the deceased person and the deceased person did not know or understand the contents of the will before approving the will.
Any person who can prove any of these and intends to challenge the will has to file a suit at the High Court.
11. What if I inherit property under a trust?
A trust is established when a person(s) or an organisation, known as the trustee, holds and administers assets for a beneficiary. For example, a trustee might hold a property for a beneficiary until they reach a certain age or administer a property so that dependents can continue living in a house.
A property placed under a trust will most likely be governed by the terms of the trust. The trustee holding the property on trust must follow the terms of the trust – strictly failing which the trustee may be held liable for breach of trust. If beneficiaries under the trust are dissatisfied with the terms of the trust or the trustee’s conduct concerning the trust, the beneficiaries may apply to the court to vary the terms of the trust or to replace the trustee.
Whether you inherit property through a will or from a next of kin, it is important to get the property transferred to your name so that you become the legal owner of the property. If you are unsure of what you have to do, seek professional advice so that everything is done in accordance with the law.
12. How do I sell off an inherited property?
Once the inherited property has been transferred to the name of the beneficiary, the beneficiary (vendor) can sell said inherited property to any interested purchaser. The vendor and the purchaser can appoint lawyers to represent them in the negotiation of the sale and purchase of the inherited property. The general industry practice is for the purchaser’s lawyer to draft the sale and purchase agreement (SPA) but this practice is not set in stone.
The sequence of events throughout the sale process is listed below:
- The purchaser will sign the SPA once it’s ready and place a 10% deposit with the vendor’s lawyer.
- The vendor will sign the SPA and his lawyer will release the 10% deposit to the vendor. The Memorandum of Transfer (Form 14a) will also be executed by the parties during the signing of the SPA stage.
- The purchaser’s lawyer will then stamp the SPA and proceed with the necessary documentation to affect the transfer of the inherited property to the purchaser.
- If the purchaser requires to take a housing loan, the purchaser’s financier’s lawyer will prepare all the loan/facility documents at this stage.
- If an application of consent is required to materialise the deal, the parties shall make the necessary application to the relevant State Government, Land Office or Land Registry.
- The purchaser/purchaser’s financier will make full payment of the balance purchase price of the inherited property by the terms and timeline stipulated in the SPA.
- The vendor has to deliver vacant possession of the inherited property to the purchaser within the time frame provided for under the SPA.
- The vendor’s lawyer will forward the original land title to the purchaser or his lawyer.
The vendor would incur Real Property Gain Tax (RPGT) if the property was sold less than five years from the date of property transfer to the vendor, as per the Real Property Gains Tax Act 1976. The vendor must deposit a retention sum equivalent to 3% (7% if the vendor is a foreigner) of the property’s selling price at the Inland Revenue Board and the RPGT will be deducted from this deposit. If there are no gains from the sale or the sale of the property falls within the tax exemption under the Real Property Gains Tax Act 1976, then a retention sum is not required. Read up more on Real Property Gains Tax and how it is calculated.
Note: This article does not constitute legal advice. Readers should consult a lawyer for specific legal advice on their particular matter.