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When You "GO", Will It Be Your Spouse or Your Children Who Gets Your Property?

Updated 12 Dec 2018 – By Contributor - iProperty


Malaysian children have been told over and over again that a property is one of the best purchases to make. “But why leh?” We knew you’d ask that. Well, it IS a solid plan for your future generation’s financial security, and it can also guarantee you a steady flow of passive income if you manage your investment wisely.

Most people would spend a huge chunk of their time and effort researching for the perfect location, properties with good price appreciation, as well as the lowest interest rates offered by banks. In cases where the banks are reluctant to lend money for whatever reason, some people turn to purchasing a property under a joint tenancy or name the property title under someone else.
 
It’s fine if you want to enter into a joint tenancy, but have you stopped to consider one aspect that will affect the ownership of real estate: DEATH? Sorry lah, we know it’s a taboo subject, but you need to be made aware that if you die without a proper will in place, your property isn’t going to automatically go to your favourite person.
 
ALSO READ: What Happens to Your Joint Purchase Property When You Break-up With Your Partner?


So you’d better be prepared for the state law to take over because…

That’s basically the only way to settle the legal rights to your property. In the eyes of the Malaysian law, only the person whose name is registered in the Sales & Purchase Agreement (SPA) will be recognised as the legal owner of the property. On the other hand, the person who has been paying all this while for the property will lose his/her rights to it. What a terrible situation to be in!
 
Before we go any further, first you need to understand one very important term that will be mentioned throughout this article:
 

Law of Intestacy: When a person dies without having a valid will in place, his/her assets will pass through what is called an “intestate succession” to heirs. It’s also otherwise known as the law of distribution. In other words, if you don’t have a will, the state law will make one for you i.e. decide on your behalf who gets a portion of your assets.

 
Rockwills Malaysia senior estate planner Jocelline Chee sums it up by saying, “In cases where a person dies without a will or trust, the Law of Intestacy will decide who are the legal beneficiaries.”



While the Law of Intestacy is supposed to be helping the deceased distribute his/her wealth as closely as possible to how they THINK the deceased might have wanted it… we all know that’s usually not the way how life works lah. Most of the time, it can differ dramatically from what the person would have really wanted and/or create further complications for the family and friends of the deceased.
 

Therefore, it’s very important for you to have…

A will OR a trust! These are two useful planning tools for your assets that serve different purposes. Both can either work separately to serve specific conditions, or together in order to create a complete asset plan. By having a will or a trust in place, the rightful owner will have peace of mind knowing that his/her interests are protected, and that any property invested will benefit the loved ones left behind.
 
The table below simplifies the key differences between the two:
 
WILL TRUST
Goes into effect only after you die. Takes effect as soon as it's created.
Involves a legal representative that directs who will receive your property at your death. Can be used to begin distributing property before, during or after your death.
Covers any property that is only in your name when you die. Property held in joint tenancy or in a trust will not be taken into account. Only covers property that has been transferred to the trust.
The court oversees the administration of the will and ensures that the will is valid, and the property gets distributed according to your wishes. Does not require a court to oversee the process. It passes outside of probate public records, and it can remain private.
Becomes part of the public record. A trust remains private and confidential.

Now let’s take a look at some examples below that would give you a better idea on which one to choose.
 

Case scenario one



Richard purchased a condominium unit with his wife, Brenda. Both of their names are registered in the SPA. However, as the only breadwinner in the family, Richard’s name is the only one on the home loan agreement. If Brenda were to pass away, would Richard get the full rights to that property?
 
Problem: Theoretically, they both have equal rights to the property since their names are on the SPA (as the joint tenants) before Brenda’s death. However, under the law of distribution, it’s a different matter altogether. If Brenda passes away, Richard would only be entitled to 25% of her share of the property, her parents will be entitled to 25% as well, while her children (if any) will receive 50%.
 
Solution: Write a will! Brenda should create one that states her 50% share of the property (y’know, the one registered under her name) should be given to ONLY her husband, Richard.
 

Case scenario two



Natasya, a mother of two, purchased a property on behalf of her brother Yusof, a father of three. While Natasya’s name is registered on the SPA, it is Yusof who takes on the full responsibility of paying for the downpayment and the monthly loan repayments. In the event of her death, who will get the rightful ownership of the property?
 
Problem: In the eyes of the law, Natasya is the legal owner of the property. Without a will, if she dies, the property will be frozen and become part of her assets to be shared out according to the Law of Intestacy. In case it was Yusof who passed away instead, and there isn’t a will either, the law does not recognise his rights on the property.
 
Without a will, according to the Law of Intestacy, Natasya’s spouse will be entitled to 25%, her parents will have 25% and her children will be entitled to the remaining 50% of the property. However, if the parents of the deceased are no longer alive, then that 25% share will be distributed among her siblings. Yes, they’re automatically entitled to a small portion of that share.
 
Solution: Create a trust! A will can be changed secretly without the knowledge of anyone, while a trust is binding, and can’t be changed without the consent of Yusof. So it’s just a matter of creating one that names Yusof as the beneficiary, and substitutes his wife and children as the beneficiaries if he dies.
 

Whether it’s a will or a trust you’re choosing…

It’s YOUR responsibility to make sure that you never leave your loved ones with more heartache in the event of your death. It’s up to you to decide if you want to enter into a joint tenancy agreement with your spouse or your mamak kaki, but please make sure that you don’t leave behind the burden of debts by ensuring that there’s legal documents in place to prevent nasty court battles.
 
That aside, if you’re still looking to purchase a property, then now is the best time to check out Loanstreet’s home loan eligibility tool to see if you’re all clear to proceed. Good luck!

This article was repurposed from "The Law of Intestacy: Till death do us apart?", first published on iProperty.com.my
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