INHERITANCE & SUCCESSION LAW'S IN MALAYSIA

Family law and defined inheritance rules

There are two parallel systems of law governing the matter of inheritance in Malaysia. The non-Muslims are governed by civil law while the Muslims are regulated by Islamic law. However, this segregation does not prevent the potential conflicts when one changes his or her religion.

Under Shariah law, inheritance follows the Islamic faraid principles of inheritance, which determines the shares, limits, and path of inheritance relevant to a deceased individual’s estate.

Under Shariah law, up to one-third of the total value of an estate may be decided using what’s known as a wasiyyah, or Islamic will.

Under civil law, estate inheritance is governed by a number of statutes and regulations.

Civil law allows for the personal wishes of an individual to dictate the ownership of an estate upon their death through the use of a will.

That means that, in theory, a sole surviving parent with three children could leave the entire estate to ONLY ONE individual.

If an individual dies without a will, the estate is divided between surviving family members according to legal precedents for what is known as ‘dying intestate’.

This essentially means that there are no clear directions as to the division of your estate. Sabah follows different laws under the Intestate Succession Ordinance 1960.

If a deceased person left a will, on death, the distribution of their estate will follow testacy laws, and the appointed executor will just need to obtain a Grant of Probate from the relevant high court.

Whereas if a deceased person dies without leaving a will, their assets are distributed according to the rules of intestacy as laid down in the Distribution Act 1958 for West Malaysia and Sarawak and the Intestate Succession Ordinance 1968 for Sabah, provided the estate is valued at less than MYR2 million only. The intestacy laws enable property to pass to survivors according to the rules of intestacy but these rules do not operate as thriftily as a proper will. Both Muslims and non-Muslims must appoint an administrator for the estate by applying to the court to issue letters of administration authorising the person or persons named to administer the deceased person’s estate in accordance with the relevant statutes.

1) Do I Have To Pay Tax For Inheriting Property?

There's currently NO tax for estate inheritance in Malaysia. A previous version of it was repealed in 1991.

Plenty of discussions about the reintroduction of an inheritance tax have been held by successive governments, but as of Budget 2020, no new laws have been introduced.

In the event that there's property to be inherited from a deceased family member or relative, an inheritance tax may be imposed on those assets, even if there’s no economic gain.

2) Would The Inheritance Tax Have A Positive Impact Though?

According to Mohideen Abdul Kader, the acting president of the Consumers Association of Penang (CAP), reintroducing the inheritance tax would have “...been the best way to tackle wealth inequality”.

So what’s all the debate surrounding inheritance tax?

For starters, there’s the injustice where a person could work all day and all night and pay their taxes, but still be stuck in the B40 group.

On the other hand, a person who doesn’t do any of those could earn a fortune by simply inheriting multiple properties and not paying any tax on them at all.

Simply put, an inheritance tax could be regarded as another way to impose a tax on inflation.

As property prices change from the time of the property being bought right up to when it’s sold, the inheritance tax would be imposed on the current market value of the property.

It’s a rather stark contrast; imagine being taxed for a home that was valued at RM50,000 40 years ago, compared to a home now valued at RM500,000!

Although inheritance tax is touted as being good for the economy and government revenue, there’s no guarantee of it being 100% effective to bridge income inequality and push property ownership up the ladder.

3) Does The Size Of My House Make A Difference To Inheritance Tax?

The size of your house, and total value of your property, may impact which government agency is responsible for overseeing the estate of a deceased individual. No inheritance tax will be applied.

Estates which have a total cash and property valuation of less than RM2 million are overseen by the Land Office and Public Trustee.

Malaysia’s High Court is responsible for distributing assets (such as property) for estates valued over 2 million.

4) What Exactly Is Estate Planning?

When we talk about inheritance, we often talk about an ‘estate’. What that means in practice is the total amount of money, financial accounts, and property owned by an individual.

That covers both inheritance money and inheritance property.

When it comes to property, inheritance can be quite complex. It is of course a valuable asset, but one where the financial value is quite literally locked into the bricks and mortar of the building.

Estate planning attempts to remove uncertainty when it comes to distributing your estate after death, by laying out/providing for your wishes.

A professionally drafted will is the first place to start, setting out your wishes in a formal document.

Insurance can be another important part of estate planning, providing the financial support for your family for everything; this is usually from a lump sum payment at the point of death to cover funeral and future expenses.

Trusts can also be an important part of estate planning. These are legal agreements that deal with the ownership and distribution of an individual’s property.

Trusts can be established as a revocable trust (can be altered or cancelled), or irrevocable trust (cannot be amended once established).

Trusts provide a useful tool in some situations to ensure the smooth transition of ownership at the point of death.

Muslim property owners can also dictate their own wishes using a wasiyyah, or Islamic will. These agreements outline an individual’s wishes around the distribution of property upon their death.

A wasiyyah cannot contradict established Islamic law around inheritance, but does allow for caveats such as the permissible one-third of an estate bequeathed when an individual dies.

To add complications to this situation, a wasiyyah is also subject to procedural review under the following laws:

Rules of the Courts 2012

Probate and Administration Act 1959 (Act 97)

Small Estate (Distribution) Act 1955 (Act 98)

Public Trust Corporation Act 1995 (Act 532)

Relevant States’ statutory provisions applicable in Shariah courts.

Inherited property, inheritance tax, inheritance money, estate planning, inheriting a house, trust property, revocable trust.

5) Am I Required To Have A Will?

No, but it’s a important and sensible thing to do in order to ensure your wishes are followed upon your death.

6) Can You Dispute An Inheritance?

Yes, inheritance disputes are why good estate planning is such an important part of inheritance. That means setting out your wishes, but also discussing them with your family.

7) What Happens To Property If Nobody Inherits It?

This is a recognised challenge in Malaysia. No official centralised record of unclaimed properties is currently kept.

Unpaid quit rent (an essential land tax) is often the only sign that a property remains unclaimed.

What is a will and why do you need it?

A will is a legal document that will determine how your wealth will be distributed among your beneficiaries and those under your care, such as minor children. It ensures it will be handled and distributed according to your wishes.

Types of Will

Holographic will: A handwritten will that is written and signed by the testator.

Oral will: Also known as a nuncupative will, which is a will that has been delivered orally through speech to witnesses.

Living will: Also known as a directive to physicians, this willallows people to state their medical care wishes in case they become unable to communicate their medical decision.

Wasiat: An Islamic will where a Muslim will make a declaration during his or her lifetime regarding assets.

A will and surat Wasiat are governed by different sets of laws, however, both serve a similar purpose.

There are two types of Wasiat:

A Wasiat where the testator can give property or asset to a non-beneficiary who is not entitled to anything under Faraid Law. Only 1/3 of the assets that are not administered after deduction of liabilities can be given. The remaining 2/3 of the Testator’s assets will remain the lawful share of his or her beneficiaries under Faraid Law.

A Wasiat where the testator can choose to donate more than 1/3 of his or her assets provided that the beneficiaries agree.

How do you draw up a will and how much would a will cost?

Wills and Wasiat can be written at banks, trust management companies, will writing providers or also with the help of lawyers. However, do take note that if you choose to go through a lawyer when writing your will or surat Wasiat, make sure you engage one who specializes in the field. This is because like doctors, lawyers have their expertise, which means getting a corporate lawyer to help with writing your will may not the best idea. Engaging a lawyer for a will or Wasiat will also be costly, even for a simple one.

Some banks in Malaysia also have their own will writing services that start from a few hundred ringgit per will. If you have a large amount of money deposited at the bank (usually over RM100,000), some banks also offer will and Wasiat writing services for free.  

Charges for wills and Wasiats will vary according to the number of clauses, or items inserted, as well as the level of complexity of the intended will or Wasiat.

This is to safeguard yourself and make sure the authenticity of the will or Wasiat will not be challenged or deemed invalid.

Writing a will in Malaysia, and the laws relating to inheritance and distribution in Malaysia

The purpose of writing a will is for a person to leave behind a legacy for loved ones, and to ensure that they are well provided for in the unfortunate event of the testator’s passing. If a person dies intestate (without having written a valid will), then the provisions under the Distribution Act 1958 will apply unless he or she is a Muslim in West Malaysia and Sarawak or is a native of Sarawak. If the person is in the state of Sabah, then the Intestate Succession Ordinance 1960 will apply. Both the act and ordinance set out the manner of distribution of any property to specific beneficiaries, after all outstanding debts (including taxes) are paid. In addition, the provisions under the Inheritance (Family Provision) Act 1971 allow the courts to grant an order that the maintenance of certain categories of dependents shall be reasonably provided for where such dependents have not been provided for, or are inadequately provided for, under the testator’s will.

Foreigners and Wills

Malaysia recognises the validity of international wills that relate to properties and assets owned by the testator in other parts of the world. However, it is highly recommended that a foreigner make a will in Malaysia under the following circumstances:

They are living permanently in Malaysia and would be considered a ‘permanent resident’ of Malaysia at the time of their passing.

They own immovable properties in Malaysia (land and buildings, for instance).

Failure to make a will in Malaysia may mean that delays occur in the transfer of their properties and assets in Malaysia to their beneficiaries, wherever they may be. In short, having a will made in their country of origin that covers all assets is still valid, but there may still be delays when it is applied in Malaysia, especially when it involves immovable properties bound by administrative red tape. As such, it would be advisable to make a will in Malaysia addressing Malaysian properties and assets to avoid the risk of delays that may take years to settle.

What are the Conditions for making a Will?

1. There are three prerequisites that must be satisfied when making a will before it is considered valid:

2. The testator must be at least eighteen years old as stipulated under the Age of Majority Act 1971 in West Malaysia and Sarawak, whereas in Sabah, the age of majority is twenty-one years old as stated under Section 4 of the Wills Ordinance 1953.

3. The testator must be of ‘sound mind’ (“testamentary capacity”) as provided by Section 3 of the Wills Act 1959.

The will must be in writing, and must also be signed by the testator (or affixed with the testator’s mark) at the foot or end of the will in the presence of two witnesses. The will must be attested by two or more witnesses in the presence of the testator and each other.

Contents of a Will

It is only sensible that writing a will be personalized according to the wishes of the will maker rather than in accordance to a template with modifications.

Having said that, the basic contents of a will should include the following:-

1. Date - the date of writing the will;

2. Name & NRIC No. - the name, address and national registration identity card's number ('NRIC No.') or passport number of the will maker;

3. Last Will Clause - a declaration as to the last will and testament;

4. Revocation Clause - a declaration to revoke the earlier will and codicil (if there is any);

5. Appointment of Executor - a clause to appoint an executor/executors as well as another executor/executors in default of execution of the former (collectively known as the 'Executor');

6. Debts, Funeral and Testamentary Expenses - a direction to the Executor to settle such debts, funeral and testamentary expenses (It is important to also note that our estate, does not only comprise of assets but also our liabilities or debts accumulated during our lifetime);

7. Distribution Clause - a clause containing the description of assets, whether specifically or generally, and the beneficiaries thereto. In the event of provisions for children, it is prudent to provide for both living children and children en ventre sa mere (i.e. children not yet born) to avoid rewriting of a will every time a child is born especially for the young couple.

8. Appointment of Guardian - a clause to appoint a guardian or guardians of children until they attain 18 years old;

9. Choice of Law Clause - a declaration that the will be construed in accordance to the laws of Malaysia;

10. Residuary Estate Clause - a precautionary clause to deal with the residual of an estate, which includes the assets void against the beneficiary, assets void or lapse by the death of the beneficiary during the lifetime of the testator, assets missed out at the time of writing a will or acquired subsequently;

11. Signature of Testator - at the end of the will; and

12. Attestation Clause - there is no standard form of attestation clause required under the law as long as both witnesses sign at the end of the will with their names, NRIC No., and addresses stated clearly.

It is optional to put in an ‘executor indemnity’ clause because there is an existing provision to indemnify the executor as per Section 64(1) of the Probate and Administration Act 1959.

What happened if the beneficiary dies during the will maker's lifetime?

As a general rule, such gift shall lapse or void by reason of the death of the beneficiary during the will maker's lifetime by reason of such devise incapable of taking effect pursuant to Section 19 of Wills Act 1959. The lapsed gift shall then be included into the will maker's residuary estate and be dealt with in accordance to the residuary estate clause. Where there is no residuary clause, the residuary estate goes on to intestacy and be distributed under the Distribution Act 1958.

However, such devise shall not lapse if the beneficiary being the testator’s child or descendants dies leaving issues, as per Section 25 of Wills Act 1959.

What happened if the beneficiary dies after the will maker's death but before the will executed or received the inheritance?

Fundamentally, a will carry into effect upon someone's death.

Therefore, since the beneficiary survives the will maker's death, the beneficiary shall be entitled to the estate under the will.

However, since the beneficiary now died, the estate of the beneficiary shall be entitled to the estate under the will instead, and be distributed according to the beneficiary's will or intestacy.

Important points on Will*

1. Only For Non-Muslims

For Muslims, inheritance will be governed under Syariah law, where one would need to prepare their “Wasiat” (the equivalent of a will) and appoint their “Wasi” (the equivalent of an executor).

Contrary to popular belief, a will and a “Wasiat” are two entirely different things governed by two entirely different set of laws although they both serve a similar purpose.

2.  Can a beneficiary be a witness to the will?

If your parents ask you to be a witness to their will, you would know for sure that you are not a beneficiary to the will (that means you will not inherit anything).

So, if that ever happens, make sure to ask them if they know what they are doing as they might not be aware that a beneficiary cannot be a witness, and whether that is what they really want to do.

3. What is the time required to get right of inheritance of property?

If you are thinking that you can walk into a bank or the land office and claim your inheritance simply by showing proof of your identification and your relation to the deceased anytime you like, you are wrong.

If a non-Muslim dies intestate (without a will), their next of kin would have to apply for a Letter Of Administration, appoint an administrator (whom all legal beneficiaries will have to agree on) and go through the lengthy process of administering an estate which can take up to 2-5 years.

With a will, the process would be much faster, but it would still take at least 3 months for the executor to obtain a Grant Of Probate (a court permission to allow the executor to execute the will) and execute the contents of the will.

4. Is the value of your assets depreciate while waiting for your will to be executed?

Usually, it would take at least 3 months for a will to be executed. If your inheritance includes assets like stock holdings, the value of the stocks might depreciate by the time legal ownership is transferred to you.

Without a will, the process could take up to 2-5 years, by which time a financial recession might occur and significantly diminish the portfolio value you would inherit.

5.is it mandatory that witnesses and the testator must sign on the will at the same time?

One of the main functions of witnesses is to ensure that the testator is of sound mind at the time the will is made.

Hence, the 2 witnesses and testator must all sign on the will in the same session

6. Wills Can Be Written At Banks, Trust Management Companies Or Will-Writing Service Providers

For most people who don’t have complicated family relations or a huge corporate empire to leave to their loved ones, a simple will done at a bank or a will-writing service provider would suffice.

Most of us might not be aware that some of the major banks have their own will-writing services that start from a few hundred ringgit per will. If you have a significant amount of deposit (usually over RM100,000) with them, some of them even offer will-writing services for free.

7. Wills Do Not Interfere With Your EPF Or Insurance Policy Nominations

Unless you did not name a nominee for your KWSP(EPF) account or insurance policies, your KWSP(EPF) and insurance policies are not subjected to the direction of any of the clauses in your will.

This is because KWSP and insurance policies are governed under a different act (set of laws passed by parliament) of their own.

8. Getting Married Automatically Revokes Your Previous Will

Any will that you have written prior to a marriage will automatically be revoked once you do. This is due to the presumption that your priorities would have changed upon marriage.

If you do not amend or make a new will after marriage and pass away unexpectedly, you will be deemed to have died intestate (without a will) and your assets will be distributed according to S6 of the Distribution Act.

The exception to this is if you were already contemplating marriage at the time you’ve written your will and have written the name of your fiancé in your will and expressly stated so.

Hence, it is advisable for you to make a new will after you get married (this applies to subsequent marriages, if any).

Probate process

Grant of Probate (with a will):

Obtain original death certificate, original will, a copy of the executor’s NRIC and residential address of executor.

Executor applies from the court for probate with list of assets and beneficiaries.

Probate obtained within three to six months (depending on locality).

Executor distributes assets, after payment of debts and other statutory obligations according to the will.

Intestacy Law in Malaysia

Muslims in Malaysia, unlike their non-Muslim counterparts, are not allowed to freely specify how much of estate to be distributed.  However, a Muslim can write a Will, and specify at his/her discretion only up to 1/3 of total estate. For non-Muslims, they can freely write a will and specify distribution proportion without restriction.

Nevertheless, Muslims must write a will. Why ?

1) You can distribute at your discretion how much to be given to your children, parent, or spouse, up to 1/3 – this is better than all of your estates are restricted by Faraid Law.

2) On will, you will nominate an Executor for your estate. It is extremely important to nominate an Executor to avoid tedious and troublesome process if your estates fall under Intestacy Law.

If a person dies without a valid Will, he or she dies “intestate.”

Intestate law is the law that decides how assets are transferred and creditors satisfied if a person passes on without saying who gets the house, the car or the guarded family apple pie receipt. Intestacy law is a set of fall back provisions or rules that govern where the assets go, so that the state does not have to decide in each individual case what happens.

Intestacy laws are like the default settings on computer program; they are there unless you intentionally alter them. Since most people die intestate, state intestacy laws govern how most people’s assets are distributed after their’ passing.

Sometimes, even when a person has a valid will, if that will does not cover some portion of their property, then state intestacy laws will be used as gap-fillers or fallback measures so that all assets are covered.

For example, the following are some of the situations where intestacy may occur:-

After making a valid Will (that has not been made in contemplation of marriage or divorce) a person divorces or marries.

The person never made a valid Will; or

If the person making the Will is of unsound mind, or mentally ill / incapable at the time of making his/her Will; or

If the Will is damaged to the extent that it cannot be read or interpreted.

A partial intestacy may also occur where a person dies with a Will, but the Will only disposes of part of the person’s estate.

One who dies intestate that is without an individual will reflecting his own wishes, automatically has provided for him by state law of a kind of standard will reflecting the legislative’s conception of the deceased’s probable objectives.

If you pass away without making a will, your assets will be distributed according to the rules of intestacy as laid down in the Distribution Act 1958 for West Malaysia and Sarawak and the Intestate Succession Ordinance 1968 for Sabah.

The intestacy laws cause your property to pass to your survivors according to the rules of intestacy but these rules never operate as thriftily as a proper will.

Your children, regardless a Muslim or non-Muslim, will need to appoint an Administrator for the estates. They must go to Court, applying letters of administration issued authorizing the person or persons named to administer the deceased person’s estate in accordance to said law.

How is the estate of the deceased Non-Muslim distributed?

Generally, the estate will be distributed among the deceased’s immediate family: his parents, his spouse, and his issue.

A person’s issue (descendants) includes his children and the descendants of his children who died before him.

What if a Non-Muslim person dies leaving no parents, spouse and issue?

If a person dies leaving no parents, spouse and issue, his estate will go to the following persons in order of priority:

(a) his brothers and sisters

(b) his grandparents

(c) his uncles and aunts

(d) his great grandparents

(e) his great granduncle and grandaunts

Therefore, if a person dies leaving no parents, spouse and issue, the estate will go to his brothers and sisters, who will share the estate equally. If a person dies leaving no parents, spouse, issue, brothers and sisters, the estate will go to his grandparents, and so on.

Only when a person dies leaving no parents, spouse, issue, and any of the above family members, will the whole estate go to the government.

If you have a Will, your estates follow Testacy Law and Executor just need to obtain a Probate. If you do not have a Valid Will, your surviving family members must apply for Letter of Administration to appoint for Administrator.

Intestacy for Muslim

If a Muslim do not a Valid Will, upon his death, the dependents must follow the same process of Non-Muslim in obtaining Letter of Administration and appoint an Administrator.

The difference is after the appointment of the Administrator. For Non-Muslim Administrator will distribute the estates according to proportion fixed by abovementioned  Distribution Act 1958 for West Malaysia and Sarawak and the Intestate Succession Ordinance 1968 for Sabah.

For Muslim, in the event of no Will, the Administrator must follow the Faraid Law.

In this respect, regardless whether a Muslim write a Will or not, he will still must follow Faraid Law’s rule of distribution. The only thing is if a Muslim write a Will, he can still escape from Faraid, up to 1/3 of total estates. With Valid Will, Muslim also can skip the tedious process under Intestacy Law.

To me, it is important for you to, as much as possible, try to avoid Faraid. You can do it by writing your will and determine up to 1/3 of total estate distribution, or better if you can just write a Hibah, a form of irrevocable trust for Muslim (I will explain how good Hibah is if I have the chance next time).

Finally, you are in the best position to decide who is to have your assets, because you actually know the people involved;

You are the one who is in the best position to decide who among your heirs should get something (or anything at all) from your estate, because these people play a greater role in your life than merely occupying some abstract position. They are the people you have laughed with, shared meals with, raised and have had raise you, cuddled with and loved.

Intestacy - Letter of Administration(Without a Will)

When a person dies intestate (without leaving a valid will), there may be a delay in distribution due to the following:

Choosing an administrator:

the beneficiaries may not agree on the person intending to apply for the Letter of Administration. The Probate and Administration Act 1959 requires all lawful beneficiaries to waive in writing their right to be administrator when appointing an administrator.

Valuing the estate:

a lot of time and manpower is required to locate, collect, assess and value all assets and liabilities. As a result, there will be increasing costs to the estate and its beneficiaries as the need for legal services, accountants, tax consultants and other professionals arises.

Finding two sureties:

the administrator must find two sureties to sign an administration bond, and the sureties must have assets within the jurisdiction equivalent to the value of the deceased’s estate. However, no surety is required if:

the estate does not exceed RM 50,000

a trust corporation is being appointed as the administrator.

the administrator is the sole beneficiary, in which case sureties are waivered at the discretion of the court (as per Section 35 of the Probate and Administration Act 1959).

Lawful beneficiaries: When an individual dies intestate, their estate is distributed according to the Distribution Act 1958. Due to the delays caused by the factors mentioned above, sometimes the estate will have to be distributed to many beneficiaries who inherit from the original beneficiaries (who may have passed away over time), or who may have relocated to different countries. Even if there are no difficulties with having many beneficiaries or with finding them, the application of the intestacy law in Malaysia will create other difficulties as shown below, be it the Distribution Act 1958 or the Intestate Succession Ordinance 1960. In addition, the intestate will not be able to dictate the terms of the distribution of their estate to the people chosen to be beneficiaries, determine what assets are to be inherited by whom, or choose the manner of their distribution. Section 6 of the Distribution Act 1958 provides the following:

Intestate dies leaving surviving	Distribution of Estate
Spouse only (no parent(s) or issue)	Spouse: whole estate
Spouse and parent(s) (no issue)	Spouse: 1/2; parent(s): 1/2
Issue only (no spouse or parent(s))	Issue: whole estate
Parents(s) only (no spouse or issue)	Parent(s): whole estate
Spouse and issue (no parent(s))	Spouse: 1/3; issue: 2/3
Parent(s) and issue (no spouse)	Parent(s): 1/3; issue: 2/3
Spouse, parent(s) and issue	Spouse: 1/4; parent(s): 1/4; issue: 2/4
No spouse, issue or parents	The following person(s), related to the intestate and alive at the death of intestate, in the following order:            Brother(s) and sister(s)            Grandparent(s)            Uncle(s) and aunt(s)            Great grandparent(s)            Great grand uncle(s) and aunt(s)
In default of any person taking absolute interest under the foregoing provisions S.6(1)(a)-(i)	Whole estate, except land, to the government (land remains frozen)

Employee Pension Fund (EPF)

It is highly recommended that all employees who contribute to the Employee Pension Fund (EPF) nominate their beneficiaries on the EPF nomination form. Failing this, the EPF assets will be distributed in accordance with their will. If the person dies intestate, then it will be distributed in accordance with the acts earlier stated.

Cancellation, Alteration and Revocation

A will is automatically revoked when one or more of the following circumstances occur:

Marriage: marriage will revoke a will made earlier by the testator unless it was expressed in the will that it was made in contemplation of marriage, and shall not be revoked by the solemnisation of the marriage contemplated to the named fiancé(e).

(Section 12, Wills Act 1959)

Writing a new will: only the latest will would be recognised as the valid one by the courts

(Section 14, Wills Act 1959)

Declaration in writing of an intention to revoke the will: the testator makes a written statement about their intention to revoke the will. The said statement has to be signed by the testator in the presence of two witnesses.

Conversion to the Islamic faith: Section 2(2) of the Wills Act 1959 states that the Act does not apply to wills of persons professing the religion of Islam. When the testator (previously a non-Muslim) embraces the Islamic faith, the will made previously shall be void as it no longer comes under the ambit of the Wills Act 1959. The testator, after conversion, can write a new will in accordance with the Islamic Laws whereby only one third of the total estate can be disposed of by way of a will, and the remaining two thirds by Sijil Faraid (a certificate of Muslim inheritance law). If the Muslim testator would like to dispose of more than one third of their total estate, the consent of all lawful beneficiaries must be obtained.

Intentional destruction: a will can be burnt, torn or otherwise intentionally destroyed by the testator or a third party in the presence of the testator and under their direction, with the intention to revoke the will (s. 14). Accidental or malicious destruction by a third party does not render the revocation effective.

Estate planning

Use of trusts in estate planning

Discretionary trusts and fixed trusts are widely used for estate planning and succession planning.

The living trust concept is also being used to carve out an individual’s assets from their estate to achieve certain objectives. The living trust is a civil-law instrument for wealth planning. It is a type of gift created during the lifetime of the settlor that remains active thereafter. Essentially, the settlor appoints a trustee or declares himself as a trustee to hold the property in trust for the beneficiaries. This instrument permits the settlor to retain complete control of the trust property during his lifetime, and enables the beneficiary to fully benefit from the trust property as stipulated in the Trust Deed. The validity of a living trust under civil law has also been legally recognised to be applicable to Muslims (such as in the case of TM Feroze Khan & Ors v Meera Hussain TM Mohamed Mydin [2006] 3 CLJ 616) as one of the estate planning instruments in Malaysia.

Use of foundations in estate planning

Foundations are recognised in Malaysia in the form of a company limited by guarantee or an incorporated trustee under the Trustees (Incorporation) Act 1952. Of note is the Labuan Foundation, which is a statutory creature under the Labuan Foundations Act 2010. These are generally no different from foundations found in other jurisdictions: it is a separate legal entity that holds assets with the objective of managing the assets for the benefit of a class of persons on a contractual basis. Labuan Foundations are also typically used for private-wealth management and charitable purposes.

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