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Managing Properties Of The Deceased

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People gain assets and properties throughout their lives and leave them all behind as they pass on. This has always been the trend for ages. A lot of people are familiar with inter vivos (legal term referring to a transfer or gift made during one’s lifetime) transaction – including buying and selling or transferring an asset as a gift to someone during their lifetime – but many do not realise the process that’s involved when transferring a property belonging to a deceased person.

The testator (a person who has made a Will or left a legacy – deceased) can appoint a person of his choice, including any of his named beneficiaries, to administer his estate, i.e. be his executor.The process, known as testamentary transfer, is different from the usual property transaction. The smoothness of this type of transactions would usually depend on the availability of a Will left by the deceased. With a Will, a person can name his beneficiaries for certain properties in his estate.

Without a Will, the estate will be distributed according to Section 6 of Distribution Act 1958, to his next-of-kin, instead of a preferred beneficiary. The distribution effect may refer to table 1:

Transaction of immovable properties (land, houses) from an estate requires a two-step process, regardless of the existence of a Will. First, the property will be vested on the executor/administrator by way of transmission. Once the beneficiary to the particular property is ascertained, the executor/administrator will transfer the property to the respective beneficiary. The difference lies in the required document.

If there is a valid Will for the said transfer, the executor does not require an Order for Sale for the transfer but if there is no Will, then the administrator will have to obtain an Order for Sale from the court to ascertain the beneficiaries involved in the transfer.

An Order of Sale is also needed to determine a purchaser when beneficiaries renounce their rights on a particular property and express intention to sell it to a third-party.

A big concern involved in this types of transaction is the stamp duty and the Real Property Gain Tax (RPGT) that are to be paid upon transaction. Stamp duty cost RM10 if the transfer is made to a named beneficiary, regardless of whether the estate is testate (with Will) or intestate (without Will). This is however, not the case if the property is to be transferred to a third-party. A full stamp duty ad valorem will be imposed on the purchasers, in this matter.

The RPGT was introduced via the Real Property Gain Tax Act 1976. It was suspended temporarily in 2008-2009, and reintroduced in 2010. It only applies when the property of the deceased is transferred to the purchaser instead of the intended beneficiary. Otherwise, the transaction is exempted from RPGT.

When RPGT is exempted, the beneficiary to the property is required to file an RPGT Form with the Inland Revenue Department. In a transaction that involves a third-party purchaser, the time and date of death of the deceased must be acquired in order to compute the RPGT.

Such transactions would consider the estate being sold directly to the purchaser, hence, the date of death of the deceased will be recorded as the property’s disposal date. If the beneficiary/executor sells the property within 5 years, the following RPGT rate shall apply.

The abovementioned information might help to clear some doubts but it is advisable for family members or nominated beneficiaries to engage a lawyer when faced with transaction or transfer issues to enable seamless administration of the estate and prevent any infringement of law.

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