The majority of us, in regards to property, have a general understanding of purchasing, selling, and renting our properties. But what about managing property that was left behind by the deceased? What happens to it? The general consensus is that it goes to the next of kin or appointed successor.
The ease of the testamentary transfer, the process of managing property(s) of a deceased person, is decided on whether a Will was left behind by the person. If no Will was left behind, the property(s) would be administered to his/her next-of-kin, in compliance to Section 6 of the Distribution Act of 1958.
However, with a Will, there may be a clearer choice of distribution of the property(s), whereby certain properties are specifically administered to certain beneficiaries of the Will.
The interesting yet unfortunate thing is that many Malaysians have not thought of, let alone, have a Will. In the event of our demise, things become difficult in regards to legal proceedings for the property(s), a process which could extend for months and even years.
However, with or without a Will, properties would have to go through a two-step process in transferring them to individuals.
Without a Will, an ‘Order of Sale’ would be needed directly from the court to clarify the beneficiary(s) that will be entitled to the property. This basically means there needs to be a verified document stating the exact new owner of the property and the aforementioned document is also crucial when the beneficiary decides to sell the property in the future. If there is a Will which has named the beneficiary of the property, there will not be a need for an ‘Order of Sale’.
In the transfer of property, stamp duty and also Real Property Gain Tax (RPGT) will be imposed on the transaction. The Stamp duty is usually just RM10 for beneficiaries, regardless of whether the property was not Willed (intestate) or Willed (testate). However, if the property is assigned to third party, then the full stamp duty will have to be paid.
This is in part due to the RPGT through the Real Property Gain Tax Act of 1976. The RPGT is applicable when the property is transferred to a purchaser (third party) rather than the original beneficiary. If not, then there is an exemption from the RPGT.
When the property is in the hands of the named beneficiary, he/she would then need to complete the RPGT Form at the Inland Revenue Department. Beneficiaries will be subjected to the RGPT rate if they choose to sell the property within a period of 5 years. Third party purchasers would also need to acquire an official date and time of death of the deceased to complete the RPGT form. This information will be listed as the disposal date for the respective property.
With all that is said, it is crucial to plan ahead and at best, create a well-planned and specific Will naming beneficiaries of properties and so on to enable the process to be easier. Other than that, it is also advised that you have a lawyer outline the exact procedures and also handle the property transfer in regards to property laws. In that way, inconveniences can be avoided and it more often than not, guarantees an insured and unhindered process.