What happen after your death ?
Most of Malaysians think that all their estate planning issues are settled once they have a Will written. This is untrue because
writing a Will merely indicates your wishes to be carried out after your lifetime. Who carries out those instructions? And how they will be carried out when you are no longer around?
Estate administration
When a person passes away, the assets and debts he leaves behind are referred to as his estate. Most people are under the mistaken impression that the deceased’s beneficiaries receive the assets almost immediately upon death or as soon as the
probate or letters of administration has been obtained.
This is certainly not the case because there is a process to follow.
Where there is a valid Will, the personal representative is referred to as the executor and where there is none, the
administrator.
During the estate administration process, the personal representative is responsible for locating and collecting the deceased’s assets, paying off the debts and distributing the assets. This is actually a very troublesome process.
The role of the personal representative is similar to that of a liquidator in the winding-up of the company. Even for experienced personal representatives, the estate administration process may span years.
Estate Administration is a very Difficult
A common mistake which most people make is to agree to be executors for the Wills of their friends or relatives without realizing that the estate administration can be an extremely tedious and difficult process.
How to find the assets?
Even the family members may not be aware of what property the deceased actually has. It is one thing to try to locate the bank accounts and life insurance policies the deceased have by writing to financial institutions and insurers.
It is a big problem to find out what real properties the deceased has or which private limited company he hold shares in. One may assume that the deceased’s spouse should know but many people do not disclose everything even to their spouse. As the personal representative, you certainly need to know what you are doing.
The last thing you want is to be sued by beneficiaries or creditors of the deceased’s estate.
Upon the conclusion of the estate administration, the executor is obliged to prepare a statement of accounts to be given to the beneficiaries. Therefore, the executor of your estate must have good knowledge of law and accounting.
Expenses after death
Death comes with costs, a lot of them. Upon the demise of a person, the family members are immediately faced with significant expenses. These include funeral expenses (i.e. costs of religious ceremonies, transportation of the casket, costs of obituary) and testamentary expenses such as lawyers’ fees and disbursements, court filing feesnand other expenses related to the extraction of the probate or letter of administration (as the case may be) as well as other estate administration costs.
These expenses together with any debts of the deceased will be paid out from the assets of the estate. However, the family members would have to pay some of these expenses first and be reimbursed months or even years later after probate or letters of administration has been obtained and the assets of the estate identified and liquidated.
Debts of the Estate
We live in a society, where individuals are becoming more and more dependent on debts and loans to finance their spending, acquisitions of their homes and vehicles. The debts which the deceased leave behind may include outstanding medical bills,
credit card debts, hire purchase loans, housing loans and taxes. While waiting for probate or letters of administration, installments for the housing loan and car repayments as well as assessment and other payments still need to be paid. Are there are sufficient funds to settle the debts and expenses of the estate? More often than not certain assets meant as gifts for beneficiaries may need to be liquidated due to insufficient funds.
What is a Trust ?
When a person dies, all of his assets including the monies in the bank accounts are frozen and will remain so until the extraction of the probate (where there is a valid Will) or the letters of administration (where there is none). This may delay any monies belonging to the estate of the deceased to be used for settling the deceased debts as well as then expenses arising directly from his passing for months or possibly even years. Having a Trust will allow funds to be immediately utilized to settle expenses or to minimize the delay in reimbursing the family members who have paid for funeral and testamentary expenses.
Filed under: Financial Planning, Inheritance / Estate
