Ask these questions before you get your inheritance in Malaysia
Before you receive your inheritance in Malaysia, there are some questions you should be asking. At times you may find yourself in certain scenarios you don’t wish to be in when inheriting your assets from your parents.
Regardless of what situation you have found yourself in, I am sure you have some burning questions in your mind. Here are some common questions for you to consider and think about before you get your inheritance.
1. Do you have to pay tax when you inherit your share of your inheritance?
The quick answer is no. There is currently no inheritance tax in Malaysia. Its previous version was revoked back in 1991.
However, in recent years there have been talks of reintroducing inheritance tax by successive governments. As of Budget 2020, no new laws on inheritance tax have been introduced.
If the inheritance tax is to be reintroduced, many Malaysians will be against it. If let’s say you are to inherit property from your parents. An inheritance tax will be imposed on this said property if it ever happens.
In all honesty, there is nothing to be gained from that inheritance tax, not even a single economic gain. It simply means that a tax will be imposed on the transfer of legal ownership. Even if let’s say you are already staying in the very same property for many years. The very same property that you are quite likely living in currently, that is.
2. Will inheritance tax have a positive impact?
According to the acting president of the Consumers Association of Penang (CAP), if we are to reintroduce the inheritance tax, there will be some positive impact. It can help tackle wealth inequality.
In summary – if a person is in the B40 income group in Malaysia, s/he will be working all day every day to pay their taxes. They may still quite likely be stuck in the B40 income group.
If a person who is not from the B40 income group will quite likely never need to do any of those. Since they are quite likely born into quite a wealthy family already. If they inherit a property, they don’t have to pay any taxes on it at all.
In short: inheritance tax can be seen as another way to impose a tax on inflation. Property prices change from time to time. Most times its value appreciates over many years. Inheritance tax will be imposed on the property’s current market value.
Though inheritance tax may be good for the Malaysian economy and government revenue, it may not be 100% effective. That means income inequality may not be guaranteed. It may also not push property ownership up.
3. Do property sizes matter when it comes to inheritance tax?
The size of your home and the total value of your property will impact which government agency is responsible for overseeing the estate. Don’t worry as no inheritance tax will be applied.
If your estate has total cash and property valuation of less than rm2mil, then it will be overseen by the Land Office and Public Trustee. However, if your property is worth more than rm2mil, then the Malaysian High Court will be responsible for distributing the asset.
4. What happens to the property if nobody inherits it?
This is a challenge in Malaysia and a recognized one at that. For the moment, no official centralized record of unclaimed properties is kept in Malaysia for now. There is such a thing called unpaid quit rent in Malaysia, which is an essential land tax. That is often the only sign that property in Malaysia remains unclaimed.
5. Are you able to dispute an inheritance?
Yes, you are able to dispute inheritance. Inheritance disputes are why good estate planning is so important in Malaysian inheritance. It simply means you set out your wishes and also discuss them openly with your family members.
Inheritance is not necessarily a complicated matter. With a bit of research and understanding, you will soon know what to expect in inheritance.