By Jessica Wee
What happens to your finances when you die? This is an uncomfortable question, but it is easier to do so when younger, rather than older.
Through my personal experience and what a few friends have shared with me in the past, many have encountered instances where:
(a) Spouses / children have no idea where the deceased money sits
(b) A spouse did not have access to money quickly, and other family members stole it
(c) A deceased left behind credit card bills and accounts that family members had no idea existed.
Leaving behind a financial mess for loved ones to deal with doubles the grief. Not only do they grieve the loss of a person, they also have to go through a big detective exercise to gain access to accounts and figure out how to settle everything. It can leave people with more bitterness and pain than it is necessary. While a will is a better way to do this, even with a will in place, you still have to physically enter beneficiaries in your accounts.
In Malaysia, most working class people contribute to the Employees Provident Fund (EPF). To nominate your beneficiary, you can either go to any EPF branch in the country and complete the nomination form. You can also do it online by logging into your EPF account using your UAN number and password. Then upload your profile photograph (size under 100 KB) if not done before. The photograph of the account holder is mandatory to proceed further in the nomination process. Then, select the e-nomination option on the EPF website.
As per the EPF rules, any EPF member who has a family can assign one or more members of the family as nominees. A member who has no family can nominate any other person, but if the member then acquires a family, this nomination will become invalid. In the event of sudden demise, the nominated members can withdraw the EPF savings from your account easily. You can nominate more than one person and also allocate the percentage share for each nominee online.
A family is defined as:
- Spouse of the employee
- Minor son and unmarried daughter of an employee
- Adopted son or daughter who was adopted before the death of an employee
What about your Bank accounts? Bank accounts are considered assets, even when it’s a Malaysian bank account. So when we say “assets”, it also includes your Malaysia bank accounts and whatever savings and investments that are in them.
Some people may or may not be aware of this, but bank accounts do allow you to appoint beneficiaries and trustees.
According to Investopedia, a beneficiary is someone you appoint to benefit from your assets. In this case, it’s your bank account. You can choose to appoint 1 beneficiary where s/he gets 100% of whatever is in your bank account. Sometimes, people appoint more than 1 beneficiary. You are allowed to appoint more than 2 beneficiaries up to a maximum amount as set by the bank.
You can appoint people who are not necessarily your immediate family or relative to be your beneficiary. However, in Malaysia most people often appoint their parents, siblings, relatives, or spouses to be their beneficiaries. There are instances where some people appoint close friends or a certain special someone that has no blood relations with them as beneficiaries.
Each beneficiary will receive a certain percentage % of the money that you have in your bank account at the point of your death. Some beneficiaries can receive a bigger percentage, while some others have a smaller chunk of the money. For instance:
Beneficiary A: 40%
Beneficiary B: 20%
Beneficiary C: 30%
Beneficiary D: 10%
We should also mention that a beneficiary may not necessarily be a person. Some people appoint an association to be their beneficiaries. It can be a church, mosque, or temple. Sometimes they may appoint schools to be their beneficiaries also. Some people leave everything to their pets who they consider family.
A trustee, on the other hand, is a person who is appointed within your bank account to administrate the monies accordingly. They may or may not receive any kinds of money from your accounts unless they are a beneficiary too.
A trustee doesn’t necessarily need to be an appointed person. Sometimes, people get a trustee service (for example: Rockwills) to help them with administering the monies they have left in their accounts.
What If I Didn’t Appoint Beneficiaries and Trustees in my Malaysia Bank Account?
This is where the real questions and worries set in. You or your family members may question whether you have appointed anyone to be trustees or beneficiaries. In this The Star article, it’s said that there are up to RM60bil unclaimed monies by heirs in Malaysia since 1957. That is a lot of unclaimed money that has been kept by Bank Negara Malaysia (BNM).
There are ways that you can take the money back. However, there will be differences in the assets inheritance (including your bank accounts) if you are a Muslim or a non-Muslim.
For a Muslim, when you pass away your assets will be frozen until the case has been settled. As Muslims, you will first have to obtain the Faraid certificates from the Shariah court. It contains information on the value of the estate, the eligible beneficiaries’ names, and the proportions of each beneficiary.
Then your heirs (Quarnic heirs or Ashabul Farud) must all agree on the same administrator. It must be in written form and be approved by the magistrate or the Commissioner of Oath. Then your wealth will be distributed accordingly based on Shariah law. It’s the same thing when you have a legal wasiat.
However, note that your funeral expenses and other outstanding debts will have to be paid off first. Then whatever money you have left will be distributed to your family member. If you have no heir, then your money will go to Baitumal (Islamic financial institute).
For non-Muslims, your estate will also be frozen until you have settled the case. You and your family members will need to appoint an Administrator, a decision that needs “approval” from all family members. Then you will swear an oath with a Commissioner of Oath.
The wealth will be distributed equally or according to what you have written in your will (if you have a legal and valid one prior). Again, like with the Muslims, the money will first be used to pay off any funeral expenses and any debts. If there are any money left, then the money will be distributed accordingly and evenly between family members.
However, if you have children under 18 years old, the court may appoint a guardian (may not be your choosing). If you have children, the money will “still go to them” in the sense that they need money for education and whatnot. However, the appointed guardian will still need to go to court every time s/he wants to withdraw money from your accounts.
Will Writing a Will Make any Difference?
This is another common question when people find out that wills do indeed influence the outcome of your bank’s money distribution. Some of you may have the thinking where “I don’t even have RM100 in my bank account so why should I care?” It’s a valid thought as you may not have a loaded bank.
However, in the near future, you may have more money in your bank. You might have assets that you would like to leave to your loved ones. So yes, write a will. Most Malaysian banks (if not all) offer will writing services available. Or you may consult Amanah Raya to help you with will writing. The charges from each bank and will-writing institutions differ though. So that’s something you will have to look out for.
Moving on to the US, the easiest way to ensure that your loved ones get immediate access to your money, is by naming them as beneficiaries on your retirement and investing accounts.
If you have a retirement account, such as an IRA or 401(k), then you should always name a beneficiary. Every broker has beneficiary forms that are specifically designed for these retirement accounts, and using them will make sure that the person or persons you want to inherit your retirement assets will be able to claim them. Without a properly completed form, your retirement account will go to your estate. There is a risk that you might miss out on some valuable tax breaks that way (your tax advisor can elaborate on this)
For stock investors, you should consider who you would want to inherit your brokerage account after you pass away. Many people don’t do anything special with their brokerage accounts, simply letting them go to whichever beneficiaries they name in their wills. However, some people are realizing the value of adding a beneficiary to their brokerage accounts in order to make things simpler. With some brokerage accounts, naming a beneficiary is a must and even when it’s not absolutely necessary, it can still be a smart thing to do.
You can typically name both primary beneficiaries and contingent beneficiaries. The primary beneficiary is first in line to inherit your brokerage account after your death. However, if the primary beneficiary passes away before you do, or if the primary beneficiary chooses not to accept the inheritance, then the contingent beneficiaries step up and get the right to your brokerage assets.
It takes only minutes to add your beneficiaries and it will save them a considerable pain!