How Do You Avoid Paying Costly Taxes On Your Probate Fees?
You may wonder if you need to pay tax on your probate fees after you have passed away. It’s a question some people may not have a solid answer to.
The whole idea of having to pay taxes on your probate fees traced back to the years when Malaysia used to have Inheritance Taxes. Back then, after you passed away, you will need to pay taxes on your inheritance before your next-of-kin gets your monies and assets. That law was abolished in November 1991. In simple words, it means you no longer pay any form of final taxes on the accumulated wealth of your assets and accounts after you have died.
However, there are certain circumstances where the deceased will still have to pay taxes on their assets. We will cover as much as we can within this article.
Definitions and Understanding of Probate
Before we move on, let’s establish a basic understanding of what probate means.
According to Investopedia, probate means:
“A legal process where a will is reviewed to determine whether it is valid and authentic. It also refers to the general administering of a deceased person’s will or the estate of a deceased person without a will.”
Probate fees can get very expensive if it is not done properly. The entire process of distributing the assets and monies can get lengthy and time-consuming too. If there are no challenges to the probate, then the entire asset distribution will go smoothly. If there are challenges to it, then the distribution will take a lot longer.
How Are Probate Fees Charged in Malaysia?
Despite Malaysia not have an inheritance tax, there will be times when you will have to pay probate fees. Before we talk about the charges, you will need to obtain a letter of administration (LOA) in Malaysia. You can do so by going through the High Court. You will have to attach the following documents with the LOA.
- Death certificate
- Applicant details
- List of assets, liabilities, monies of the deceased
- List of potential beneficiaries
- Any noteworthy interest of the applicant
This entire process can take anywhere from 6 months to 2 years. Depending on how big the estate value is, you may have to provide further sureties. Usually, this path is for assets worth more thanRM500,000.
After that, you will need 2 friends or family members who have an estate worth more or less the same as the testator’s estate.
If your assets are worth more than RM600,000 then you are eligible to go for Amanah Raya administration, a government-owned public trustee. The process can take anywhere from 4 to 6 months for estates with movable property. It can also take up to 1 year for estates with immovable assets.
You can expect the following charges to be applicable:
|RM25,000 to RM225,000||2%|
|RM225,000 to RM250,000||3%|
|RM250,000 to RM500,000||4%|
|More than RM500,000||5%|
Alternatively, you can also go for the Small Estates application for immovable assets. However, the estate must not be worth more than RM2mil, otherwise, you will not be eligible for this option. This option does not need lawyers and is usually less expensive compared to the previous suggestions.
If you choose to go for this option, you will need to provide a full and complete list of assets and liabilities of the individual:
- Form A of Small Estate Application
- IC and/or birth certs of beneficiaries
- Marriage certificate of deceased (if any)
- Death certificate
- Evidence of assets
- A certified true copy of the land title or official title search from Land Office
- Quit rent and assessment receipts
Then the applications are to be made at the Estate Distribution Unit of the Department of the Director-General of Land Mines (JKPTG) or Land Office.
In short, the probate fees are not subjected to tax. However, there are rates chargeable if your assets are worth more than a certain amount in Malaysia. Typically the distribution of assets and money should be relatively fast under 1 year if all documents are presented completely and have no challenges to it. Otherwise, you can expect the distribution of assets to take up many years.