Over the years, you have become successful and accumulated assets, businesses as well as investments
You may heard of the difficulties faced by the family in the process to inherit the assets when a person pass away. It seems administering a deceased’s estate is a daunting and complicated task.
Have you got these concerns too ?
- What happens to my assets after I pass away ?
- Who can help me to settle my debts and distribute my assets ?
- What are the procedures for my estate administration ?
- Who should I pass my assets to ?
- How should I keep my asset documents ?
What make greatness is starting something that lives after you. ~ Ralph W. Sockman
What happens when a person pass away ?
When a person pass away, the deceased’s estate will be frozen. Estate is essentially encompass all items the deceased person have left behind in the form of assets or liabilities. :
Assets can be broadly classified into and movable or immovable assets.
- Movable assets include cash, bank accounts, cars, jewelleries, shares, unit trusts, insurance policies and your Employee Provident Fund (EPF) account.
- Immovable assets are real properties like houses, condominiums, shop lots , commercial buildings or even land.
Liabilities are loans or debts left behind pending clearance. There are 3 broad category of liabilities
- Personal income tax liabilities
- Secure liabilities like bank loans, credit card personal loans, vehicle hire purchase
- Unsecure liabilities like borrowings from siblings, friends or relatives
Immediate impact to deceased family
- Source of income stops
- Bank accounts, even joint account are frozen and cannot withdraw money
- Unit trusts accounts, even joint account are frozen and cannot redeem for cash
- Car, house, shares are frozen and cannot be sold or transferred
- All loan repayments, bills have to continue to service and pay
For business owners, the death of a business partner has big impact to the business too
- If the business is structured as sole proprietor or partnership, the whole business is dissolved
- For limited liability company, the shares are frozen and suspended pending price valuation
- Deceased family can appoint a substitute person to act as deceased representative in business
- The surviving partners need to service and pay all business loan repayments, bills, expenses
- The surviving partners need to decide whether to buy over deceased shares in the business
The only assets that may not be frozen are insurance policies and money in EPF provided that proper nominations had been made. If there are no nominations, monies from the insurance policies and EPF will also be frozen and channelled into deceased estate as well.
Beside money and business, the next thing in line the deceased family need to worry is to apply for Grant of Probate (where there is a will) or Letter of Administration (where there is no will) from the High Court. This application process is a very time consuming and costly. With a will, it may take up one to two years just to transfer the deceased’s estate to the rightful beneficiaries. Without a will, this process could be even longer.
Parties involved in estate distribution
There are 4 parties involved in a estate distribution :
- The appointed parties (persons or corporation) to by High Court to administer the estate.
- For estate with Grant of Probate(with a Will), the personal representative is appointed as Executor
- or estate with Letter of Administration(without a Will), the personal representative is appointed as Administrator
The rightful recipients of the deceased estate assets
- The custodian or protector for the minor children of deceased family
- Guardians are normally siblings of the deceased
Surety / Guarantors
- The financial guarantors appointed by the High Court to safeguard the estate in a situation without a Will
- Surety / guarantors are hard to find as their money has to be pledged to the High Court for many years and become public records.
Potential problems during estate distribution
All sorts of issues can arise between beneficiaries and the appointed personal representatives (either Executors or Administrators) who are administering the estate. These issues are usually circled around money, competence, the sour relationship among siblings, the time to follow through and execution decision.
In-fighting among beneficiaries and legal proceedings complicate the distribution process and deplete the estate faster.
- The appointed personal representatives may be unsuitable to act in that capacity
- The appointed personal representatives may not undertake and fulfil their duties efficiently
- The appointed personal representatives could siphon money and not behave honestly
- Estate not distributed fairly or equitablely
- Forced sale of personal & business assets to pay off debts
- Family in-fighting with court proceedings and ligitations in the public eye
- Disputes over the valuation of assets
- Identification of assets which should form part of the estate or how personal effects be distributed
- Payments of expenses such as income taxes, interest on late payment, legal, accounting fees, medical and funeral costs that cause the estate be depleted
- Disputes between family members because of sibling rivalry and dominance
- Beneficiaries with ambiguous and contrary beliefs about their rightful role
- Misunderstandings of intent, different expectations, resistance to change or unspoken fears
- Lenghty and slow distribution process
- Misplaced or missing original documents
- Lack of follow up and follow through by the personal representatives
Do you want to see 50-70% of your estate wasted on cost?
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